Thanks to Gordon Exall for spotting The Civil Procedure (Amendment No. 4) Rules 2015 which were laid before Parliament on 24 July. The SI can be found here: www.legislation.gov.uk/uksi/2015/1569/pdfs/uksi_20151569_en.pdf.
The explanatory notes are copied here:
“These Rules amend the Civil Procedure Rules 1998 (S.I. 1998/3132) by—
- amending rule 3.1 (court’s general powers of management) to make it clear that the court’s powers include hearing an Early Neutral Evaluation;
- inserting a new rule 3.1A making provision for the way in which the court is to approach case management in a case where at least one of the parties is unrepresented;
- inserting in Part 5 a cross-reference to provisions which disapply, or apply with modifications, provisions in that Part about access to court documents;
- amending rule 7.4 to ensure that the claimant not only serves particulars of claim on the defendant, but also files them;
- amending rule 47.6 to alter requirements for the commencement of detailed assessment proceedings;
- inserting a new rule 52.15B covering appeals in planning statutory reviews; and
- inserting a new Part 63A to introduce a new specialist list called the Financial List, to handle the more complex and important financial markets cases.”
Should you have any costs queries, contact us on 01900 385 285 or email Richard.firstname.lastname@example.org.
The former Conservative MP Tim Yeo is becoming an invaluable resource to litigators involved in costs budgeting (see our blog “Budgeting for contingencies”). Yesterday Mr Justice Warby handed down a second Judgment concerning Mr Yeo’s costs budget in his claim for libel against the publishers of The Sunday Times.
On 10 July 2015 Mr Yeo’s solicitors served a revised costs budget and issued an application for approval of the revised budget on 13 July. They sought to add various sums, some of which were then either abandoned or agreed.
A more substantial amendment for £36,120 and described as “Contingent Cost A: Considering impact of parliamentary privilege and considering and making amendments to statements of case and witness evidence of both parties” was disputed. Of the £36,120, £21,000 had already been incurred by the time the costs budget was signed.
On behalf of Mr Yeo it was submitted that the Court could approve the revised budget pursuant to PD3E 7.6:
“Each party shall revise its budget in respect of future costs upwards or downwards, if significant developments in the litigation warrant such revisions. … The court may approve, vary or disapprove the revisions, having regard to any significant developments which have occurred since the date when the previous budget was approved or agreed.”
Mr Justice Warby agreed with the Defendant’s submission that PD3E 7.6 was not “an apt vehicle” for obtaining the Court’s approval for costs already incurred. Mr Justice Warby found his decision was supported by PD3E 7.4 which states:
“As part of the costs management process the court may not approve costs incurred before the date of any budget. The court may, however, record its comments on those costs and will take those costs into account when considering the reasonableness and proportionality of all subsequent costs.”
How do you vary a budget if the costs have been incurred?
In support of the Claimant’s submissions Mr Justice Warby was reminded of his February judgment (para 71) which stated:
“If work identified as a contingency is included in a budget but not considered probable by the court no budget for it should be approved. If the improbable occurs, in the form of an unexpected interim application, the costs will be added to the budget pursuant to PD3E 7.9, unless the matter involves a “significant development” within para 7.6 in which case, if time permits, a revised budget should be prepared and agreed or approved.”
Mr Justice Warby placed emphasis on the words “if time permits”. He said “if the unexpected happens, and time does not allow for a revised budget to be approved before costs are incurred, then there will often, perhaps usually, be an unexpected interim application and PD3E 7.9 will apply.”
The fall-back position is CPR 3.18(b) which allows a party to try to persuade the Court on Detailed Assessment that there was good reason to depart from the budget.
Mr Justice Warby accepted there was some force in the Claimant’s submission that this position left him in “undesirable uncertainty about the recoverability of a large slice of cost until after the assessment stage”. However this did not lead the Judge to a different conclusion.
The issue arose on Monday 6 July and an amended budget was served on Friday 10 July. Mr Justice Warby said it was not clear “why a revised budget could not have been prepared sooner than 10 July.”
The criticism of the timing may alarm many busy practitioners. The Judge accepted his decision put “a high premium on swift action” but he did not see good reason to adopt a different interpretation.
The Judgment emphasises that costs budgeting is integral to litigation and should, where possible, be a prospective exercise, flowing with the litigation, not following it.
In any event Mr Justice Warby did not accept that there had yet been a “significant development in the litigation” within the meaning of PD3E 7.6 which would justify the approval of additional costs.
“He said I do not doubt that between 6 and 10 July Mr Yeo’s legal team did give attention to Parliamentary Privilege and the issues identified in the Revised Budget. But their approach does seem to me to smack of tactical manoeuvring.”
He went on to say:
“It may yet be that some revision in the budget of one or both parties may in future be shown to be justified in order to deal with issues of Parliamentary Privilege, but at present I am not persuaded that I have been presented with any justification for approving the revision put forward on that ground, pursuant to PD3E 7.6. “
We may yet see another decision on budgeting in this matter.
If there is a “significant development” in your litigation, identify the costs of the work to be done then move quickly!
The Judgment can be found here: http://www.bailii.org/ew/cases/EWHC/QB/2015/2132.html.
Following the Pilot Scheme under CPD 51E and the implementation of the Jackson reforms, new rules came into play on 1 April 2013 which means claims for costs which total £75,000 or less (CPR 47.15(1)) are assessed on the papers and neither party is required to attend a Detailed Assessment hearing.
Here I will outline the basics of the Provisional Assessment process for receiving parties and comment on how to ensure you have the best chance of passing through the process smoothly and successfully. Efficiency in this process is especially important because the recoverable costs are capped at a maximum of £1,500 plus VAT, plus Court fee (CPR 47.15(5)).
In order to commence the assessment process you will need to serve (as per CPD 5.2 supplementing CPR 47.6) the following documents on the paying party:
- Notice of commencement in Form N252;
- A copy of the bill of costs with signed certification;
- Relevant details about any additional liabilities;
- Copies of the fee notes of Counsel and of any expert in respect of fees claimed in the bill;
- Written evidence as to any other disbursement which is claimed and which exceeds £500;
- A statement giving the name and address for service of any person upon whom the receiving party intends to serve the notice of commencement.
While not a requirement you may decide to serve all fee notes and vouchers to avoid potential queries/ arguments later on. It is our practice to annotate the disbursement vouchers in the Assessment Bundle with the corresponding item numbers in the bill for ease of reference.
Points of Dispute
The paying party’s objections to the bill of costs “must be short and to the point” (CPD 8.2) and insofar as practicable they must:
“(a) identify any general points or matters of principle which require decision before the individual items in the bill are addressed; and
(b) identify specific points, stating concisely the nature and grounds of dispute.”
It is quite common to see objections to particular items which simply say “excessive” or “unreasonable”. We take the view such objections do not comply with (b) above and we have been successful in persuading the Court on Provisional Assessment to strike-out such objections.
It should also be remembered that the paying party is required to “state in an open letter accompanying the points of dispute what sum, if any, that party offers to pay in settlement of the total costs claimed.”
There is usually no good reason why a paying party cannot pay at least this amount on account of costs.
Replies to Points of Dispute
Once Points of Dispute have been received Replies to Points of Dispute can be prepared pursuant to CPR 47.13. Remember that CPD 12.1 & 12.2 supplementing CPR47.13 confirms that Replies “must be limited to points of principle and concessions only. It must not contain general denials, specific denials or standard form responses”.
Although a number of judges have expressed dismay at seeing receiving parties providing standard responses to the Points of Dispute our experience shows us that a concise response can be necessary to justify the costs or explain why the objection is wrong. Indeed some Judges have taken the absence of a response as an indication that the objection is accepted! Although optional we would always advise serving Replies as this could be the only opportunity to respond to the objections on Provisional Assessment.
Request for Provisional Assessment
Assuming the parties have been unable to reach agreement the next step would be to request a Provisional Assessment by completing the relevant Form N258 in accordance with CPR 47.15 (3). The form is self-explanatory. The following documents should be provided:
- The document giving the right to Detailed Assessment (i.e. Sealed Court Order or acceptance of a Part 36 offer);
- The Notice of Commencement (Form N252);
- The Bill of Costs;
- Points of Dispute;
- Replies (if any);
- Statement of parties;
- Relevant details of any additional liability claimed;
- Copies of all the orders made by the Court relating to the costs of the proceedings which are to be assessed;
- Any fee notes of Counsel and receipts or accounts for other disbursements relating to items in dispute;
- (Where there is a dispute as to the receiving party’s ability to pay) the client care letter delivered to the receiving party or legal representative’s retainer.
In cases where Provisional Assessment applies:
- An additional copy of the bill, including a statement of the costs claimed in respect of the Detailed Assessment based on the assumption that there will not be an oral hearing; and
- The offers made (those marked ‘without prejudice save as to costs’ or made under Part 36 must be contained in a sealed envelope, marked ‘Part 36 or similar offers’, but not indicating which party or parties have made them).
In order to assist the Court we usually prepare an indexed, paginated bundle. This will ensure the Judge can easily work through the documents saving Court time and making for a simpler assessment. In our experience Judges have little patience for disorganised paperwork!
On receipt of the Request for Provisional Assessment it is within the Court’s discretion to decide that the claim is unsuitable for Provisional Assessment. In our experience this can occur where there are significant issues of principle, arguments over conduct or if relatively large items such as insurance premiums are in dispute. If you feel the Court (or you) would benefit from oral submissions, invite the Court to invoke its discretion when you file the Request.
Once the Provisional Assessment has taken place the Court will send the assessed bill of costs to both parties with a Notice stating that any party who wishes to challenge any aspect of the Provisional Assessment must file and serve a written request for an oral hearing within 21 days. If no request is filed within this time the assessment will be binding on the parties “save in exceptional circumstances”.
If you do wish to challenge the Provisional Assessment your request should identify the items you wish the Court to review at an oral hearing and provide a timescale for the hearing (CPR 47.15(8)).
You should bear in mind CPR 47.15(1) states that any party which has requested an oral hearing will be responsible for the costs of an incidental to that hearing unless:
“(a) it achieves an adjustment in its own favour by 20% or more of the sum provisionally assessed; or
(b) the court otherwise orders.”
The review can sometimes be an uphill struggle: you will usually appear before the Judge who conducted the Provisional Assessment, and have to try to convince them they were wrong (or at least not wholly right!).
Also note the costs limit of £1,500 no longer applies once an oral hearing has been requested.
Costs of the assessment process
The receiving party will be entitled to the costs of the Detailed Assessment process except where the Court makes some other order.
CPR 47.20(3) states – “In deciding whether to make some other order, the court must have regard to all the circumstances, including –
“(a) the conduct of all the parties;
(b) the amount, if any, by which the bill of costs has been reduced; and
(c) whether it was reasonable for a party to claim the costs of a particular item or to dispute that item.”
However, clearly any offers the paying party has made, and whether those offers have been ‘beaten’ will be highly relevant. Part 36 is modified in CPR 47.20 in order to apply to costs proceedings. An early, sensible Part 36 offer can expose the paying party to risk and bring rewards if not accepted.
 These notes deal with the procedure assuming the receiving party has an order or deemed order for costs. If not then ‘costs only’ proceedings will be required under CPR Part 8 pursuant to CPR 46.14.
 It should be noted that CPD 9.5 (3) supplementing CPR 44.6 confirms that the statement of costs should follow as closely as possible Form N260 and must be signed by the party or the party’s legal representative.
It is little wonder that since the implementation of the Jackson reforms and the introduction of massively increased Court issue fees many Solicitors have been reconsidering how to fund claims, particularly disbursements.
A number of firms are now exploring the use of ‘Disbursement Funding Agreements’ (“DFA”). In essence the client enters into a credit agreement with the firm or a third party lender in order to finance the disbursements, and in exchange the client is responsible for the interest on the credit extended.
There are obvious benefits – often impecunious clients can afford to pursue their claim and disbursements can be paid promptly without impacting upon cash-flow for the firm. The DFA can sit alongside a Conditional Fee Agreement.
Of course taking out a loan to fund legal costs is not new. What is relatively new, at least in the fields of Personal Injury and Clinical Negligence, is that firms are seeking to claim all or some of the client’s loan interest from the Defendant upon the successful conclusion of the claim. A few questions arise:
Is pre-Judgment interest recoverable?
Yes – CPR 44.2(6)(g) empowers any Court to award “interest on costs from or until a certain date, including a date before judgement”.
But what about interest on disbursements funded under a DFA?
In Jeffrey Jones and Others -v- The Secretary of State for Energy and Climate Change and Coal Products Limited  EWCH 1023 (QB) (http://www.bailii.org/ew/cases/EWHC/QB/2013/1023.html) the Honourable Mrs Justice Swift DBE allowed “pre-Judgment” interest at a rate of 4% above the bank base rate on disbursements funded under a DFA. The decision was upheld by the Court of Appeal on 27 March 2014 (http://www.bailii.org/ew/cases/EWCA/Civ/2014/363.html).
Will Defendants dispute the claim for pre-Judgment interest?
In Jones the Defendant was granted an Order for disclosure of the sections of the Claimants’ Conditional Fee Agreements “which related to the obligation to pay disbursements and interest or credit charges thereon”. Disclosure of the credit agreements themselves was also ordered to allow the Defendant “to satisfy themselves that they constituted genuine and valid agreements for the payment of interest.”
In anticipation of similar requests for disclosure Claimants will wish to ensure their agreements are bullet-proof.
Furthermore, both the award of pre-Judgment interest in principle and the rate of that interest remain at the discretion of the Court. In the High Court Mrs Justice Swift commented that:
“Of course, the rate of interest agreed between Hugh James and the claimants cannot of itself be determinative of the rate which should be awarded by the court pursuant to CPR 44.3(6)(g). If it were, it would be open to an unscrupulous solicitor to demand a wholly unreasonable rate of interest in the knowledge that the defendant would have to pay. The credit charges specified in the credit agreements provide only prima facie evidence of the cost to the claimants of obtaining the credit necessary to fund their disbursements, and that prima facie evidence would plainly be displaced by evidence that the charges were excessive.”
Consequently any interest which is recovered from the Defendant could only represent a contribution towards the Claimant’s total liability for interest.
Should you have any costs queries, contact us on 01900 385 285 or email Richard.email@example.com.
One of the problems he addressed was the backlog of clinical negligence cases waiting for a CCMC in the RCJ. The waiting time was running at about 9 months. Lord Justice Jackson stated “delays of that order are unacceptable and defeat the object of the 2013 civil justice reforms”.
His solution was to grant a “one-off release” from Costs Management for the clinical negligence cases which already had CCMCs listed between October 2015 and January 2016. Those cases would instead be listed for old-style Case Management Conferences. With this approach it was believed the backlog could be cleared by the end of September 2015.
The current position
Since Lord Justice Jackson’s lecture parties with clinical negligence claims in the High Court have begun to receive Orders stating that Costs Management will not apply. The Orders list the claim for a traditional Case Management Conference and direct the parties to exchange estimates of costs within 14 days. The Orders specify that the estimate may be in the form of Precedent H.
The immediate thought is why would anyone prepare a Precedent H when they did not have to? Indeed this has been the approach of one of our clients.
There is also a broader query in relation to the effect of any estimate which is served.
Estimates of costs
Simon Gibbs has commented more than once on his blog (http://www.gwslaw.co.uk/2013/03/costs-estimates-transitional-provisions/) about the lack of transitional provisions in relation to estimates of costs.
Under the pre-1 April 2013 rules PD 6.6 allowed the Court to have regard to any estimate filed by the parties and take this into account as a factor amongst others, when assessing the reasonableness and proportionality of any costs claimed.
Where there was a difference of 20% or more and it appeared to the Court that the receiving party had not provided a satisfactory explanation or the paying party reasonably relied on the estimate, the Court could regard the difference as evidence the costs claimed were unreasonable or disproportionate.
Those Practice Directions were swept away on 1 April 2013 and similar provisions relating to costs budgets were inserted at PD 3.1 supplementing CPR 44. There is no mention in the rules as to the effect of an inaccurate estimate of costs. Is a budget an estimate? Yes. Is an estimate a budget? Probably not.
At a time of great civil justice reform and when the costs of clinical negligence claims are under attack (www.bbc.co.uk/news/health-33287879), it seems incongruous to remove powers which could potentially limit excessive or disproportionate costs. But that’s what is disappointing about the attacks – the Court and the paying party already have the resources to reduce excessive costs.
Many of the current claims for costs will contain success fees and large premiums which will gradually disappear from clinical negligence. The new proportionality test is waiting for its moment too.
With only 14 days from the date of the Order to complete the estimates of costs one wonders how many will turn out to be inaccurate. Defendants will be carefully recording their reliance upon the estimates received. The Court of Appeal’s decision in Leigh v Michelin Tyre Plc  EWCA Civ 1766 may not be dead after all. The difference this time around is that proportionality has teeth.
Why would anyone prepare a Precedent H when they did not have to? Because it ensures parties think carefully and comprehensively about the costs to be incurred, thus avoiding problems later. Whether a budget or an estimate is prepared, the process behind the scenes should be the same.
Should you have any budgeting or costs queries, contact us on 01900 385 285 or email Richard.firstname.lastname@example.org.
(Further information on the Lord Justice Jackson’s lecture can be found here www.harbourlitigationfunding.com/news/confronting-costs-management-the-third-annual-harbour-lecture.)
“Success depends upon previous preparation, and without such preparation there is sure to be failure.” – Confucius
Is costs budgeting here to stay? It appears so. In May this year the Master of the Rolls, Lord Dyson commented during his attendance at the Harbour Litigation Funding Conference with Jackson LJ that “At the very outset, I want to make it clear that I strongly support costs management. As Sir Rupert says, the new regime is in the public interest and is here to stay.”
Further information can be found on these speeches at: http://www.harbourlitigationfunding.com/news/confronting-costs-management-the-third-annual-harbour-lecture
Two years in, costs budgeting continues to create mixed feelings amongst litigators. In this blog I intend to look at a particular area which has caused some confusion and disagreement, the contingent phases.
What is a contingency?
There is no reference at all to contingent costs or contingencies in CPR 3 or in the supporting Practice Direction. The definition can be found in the “Guidance notes on Precedent H” which accompanies the Precedent H in CPR 3. The note states:
“The ‘contingent cost’ sections of this form should be used for anticipated costs which do not fall within the main categories set out in this form. Examples might be the trial of preliminary issues, a mediation, applications to amend, applications for disclosure against third parties or (in libel cases) applications re meaning. Costs which are not anticipated but which become necessary later are dealt with in paragraph 2.61 of PD3E.”
Careful consideration needs to be given to contingent phases in a budget. Recent case law has shown that the Court will not accept the approach of ‘chuck it in just in case!’
In Yeo –v- Times Newspapers  EWHC 209 (QB) the contingent phases had caused some difficulties: “The parties between them identified six contingencies. Not one was common to the parties.”
In his judgment Mr Justice Warby provided helpful guidance on what to include as a contingent phase. This guidance can be summarised in three points:
1. The contingent phase must involve work that does not fall within the other phases in the Precedent H.
2. It must be possible to demonstrate to the opponent and the Court what that work would be.
3. The work should be included as a contingency only if it is more likely than not to be required.
Mr Justice Warby applied this guidance to Mr Yeo’s contingent phases “Strategy review and consultation” and the fantastically vague “Possible further work”, refusing to allow either. Three of the four contingent phases identified by the Times Newspapers received the same treatment.
What if the improbable occurs?
Mr Justice Warby considered there was sufficient protection in the rules. The costs of unexpected interim applications could be added to the budgeted costs under PD 7.9 and more significant developments in the litigation could be addressed by amending the budget under PD 7.4.
Contingent phases have a habit of breeding like rabbits, especially in more complex cases. The judgment in Yeo will hopefully encourage parties to only budget for contingent phases which represent distinct categories of work and which are reasonably likely to occur.
While not always possible, we suggest parties could attempt to agree the contingent phases with the opponent as part of the budgeting dialogue.
In our experience Judges in the RCJ prefer the costs of preparing the Precedent H and for dealing with costs management to be included in two separate contingent phases. The purpose is to ensure the costs do not exceed the respective caps set out in PD 7.2(a) and (b). These phases would fail Mr Justice Warby’s tests but do rectify a defect in the drafting of Precedent H.
For the full Judgment in Yeo –v- Time Newspapers  EWHC 209 (QB) please see http://www.bailii.org/ew/cases/EWHC/QB/2015/209.html
Should you have any budgeting or costs queries contact us on 01900 385 285 or email email@example.com.