The court has held that only the costs of obtaining an advice from a Solicitor/Counsel on the merits of settlement and (potentially) the costs of the proceedings themselves such as the preparation of the claim form and the attendance at court, unless the matter is complex, which is unlikely where the damages are less than £1,000.00.

Practically this means, where infant cases settle under £1,000 (and there are no exceptional circumstances), the amount of recoverable costs is likely to be a few hundred pounts profit costs plus VAT, disbursements etc.

Further details will follow in due course.

Receiving Party solicitor’s have been handed a belated Christmas present by the Court of Appeal when it handed down the recent decision of Adrian Simcoe v Jacuzzi UK Group Plc [2012] EWCA Civ 137 holding interest in CFA cases is recoverable from the date of judgment giving rise to an entitlement to costs (‘the incipitur date’) as opposed to the date of agreement or quantification of the costs payable as a result of judgment (‘the allocatur date’). The Court of Appeal have done this by reaffirming the decision and reasoning of Lord Akner in Hunt v AM Douglas (Roofing) Ltd [1990] 1 AC 398 and also holding that CPR 40.8 is ineffective in the County Court for failure to obtain concurrence from the Treasury on the implementation of the rule (a requirement written into the County Courts Act 1984).

The Facts of Simcoe v Jacuzzi

Briefly the facts are as follows; Irwin Mitchell agreed to act for the claimant in October 2007 on the basis of a conditional fee agreement (“CFA”). Proceedings were issued in the Leeds County Court and on the 16th April 2010, and were compromised by consent, with the defendant agreeing to pay the claimant £12,750.00 damages, together with costs to be assessed in default of agreement. The costs of the claimant were eventually agreed in the sum of £74,000.00, which was paid to the claimant solicitor.

The issue which remained live between the parties was whether the defendant was liable to pay interest on the sum of £74,000.00 from the 16th April 2010 (the claimant’s contention) or from the date on which the sum payable for costs was formally agreed (the defendant’s contention). The issue was determined by District Judge Hill on the 9 June 2011. The judge held in favour of the defendant basing his decision on the judgment of His Honour Judge (“HHJ”) Stewart QC in the case of Gray v Toner (11 November 2010). His Honour Judge (“HHJ”) Gosnall gave the claimant permission to appeal and ordered, pursuant to CPR 52.14, that the appeal be transferred to the Court of Appeal as it raised an important point of principle.

The Issue and Background prior to the Court of Appeal’s decision

The issue of principle to be decided by the Court of Appeal can be expressed as follows; where the court orders one party to pay the other party’s costs in a sum to be agreed or determined, does interest run (i) from the date of the order for costs as agreed or assessed, or (ii) from the date on which the sum is agreed between the parties or assessed by the court?

This issue has been canvassed on a number of occasions at various levels within the judicial system prior to the hearing of the matter by the Court of Appeal, resulting in a variety of decisions being made, for a variety of different reasons. The decision which really brought the issue to the fore was the decision of HHJ Stewart QC in Gray v Toner. This was then followed by the decision of HHJ Harris QC in Bridle v Ikhlas (22nd February 2011), the first instance decision of Master Hurst in Motto v Trafigura Ltd [2011] EWHC 90206 (Costs) and the decision of Master Leonard in Kurian v Falzon [2011] EWHC 90213 (Costs).

In Gray it was held that the Judgments Act 1838 s.17, clearly envisaged the judgment debt only arose when the sum which the judgment debtor owed to his judgment creditor was quantified. When instructed on CFAs barristers and solicitors often expressly agreed to finance a client’s litigation until it was completed, and they could allow a proportion of the success to compensate for delay in payment and further interim payments were often made or awarded by the court which satisfied the primary purpose of an award of interest being to compensate a party for being kept out of his money. It was held that the primary purpose of awarding interest was not applicable in a case which was funded by way of a CFA as the Claimant had never expended any money in pursuing the litigation. It was therefore stated that the discretion in CPR 40.8 should be used.

The decision in Gray was then followed by the decision of HHJ Harris QC in Bridle v Ikhlas (22nd February 2011). Again this was a case which had been funded by way of a CFA and the same issue arose as to when interest was payable from. Once again the judgment handed down went in the Paying Party’s favour. It was held that each case turned upon its own facts and had to be considered on its own merits so as to reach a conclusion which fitted the justice of the particular case. He held that CFA funded cases were of a particular type of case in which the claimant was not precluded from obtaining a return on money he had spent pursuing his claim because he did not finance the costs of the litigation himself and therefore it was far from fair to award interest from the date of judgment. HHJ Harris stated that the judge at first instance was wrong in that he had based his decision on general principles rather than by looking at the case upon its own facts and weighing up the merits.

In June 2011, Master Hurst gave the second of his judgments in Motto. The claimant relied on the judgment on Hunt v RM Douglas (Roofing) Ltd and stated that the incipitur rule was still the rule which applied and that the Court had no jurisdiction to vary this rule under CPR 40.8 or 44.3(6)(g). The defendant contended the judgments in Gray and Bridle should be followed. Since the amendment of s.17 of the 1838 Act, in 1999, and the introduction of the CPR, the decisions of the House of Lords in Hunt and Thomas v Bunn [1991] AC 362 were no longer binding and that the allocatur rule should apply. Master Hurst disallowed interest, whilst stating that the decisions of Hunt and Thomas were still binding, on the basis that the CFA did not contain a contractual obligation on the claimant to account for interest and therefore as a result it was right to use CPR 40.8.

The issue of interest was still troubling the courts as late as November this year when Master Leonard was asked to consider the issue in Kurian v Falzon. The same arguments were put forward by the defendant in this case as those canvassed by the defendant in Gray and Motto, i.e. that the allocatur rule was now applicable as a result of CPR 40.8. It was argued by the Claimant that the incipitur rule was still applicable for a number of reasons being (i) nether the amendment of s.17 nor the introduction of the CPR required any amendment to the meaning of judgment; (ii) the court remained conclusively bound by the House of Lords authority which favoured the incipitur rule; (iii) CPR 44.12(2) expressly provides for interest to run from the date of entitlement, not assessment, which is consistent with the amendments to the CPR being predicated on the basis of the continuing application of the incipitur rule and (iv) CPR 40.8 and 44.3 (6)(g) reflects a primary intention to allow the courts to consider awarding interest from an earlier date than the costs order, which is consistent with a presumption that that date of the costs order will normally be the starting point.

Master Leonard came to the conclusion that the incipitur rule was still the favourable rule to be applied and awarded interest on costs from the date of the order. He said that the introduction of discretion to depart from the normal starting point did not in itself justify the conclusion that the starting point had changed. He stated that he should not depart from the starting point that the incipitur rule applied as the advantage of using an established principle bred simplicity and certainty. However he qualified his judgment by agreeing with Master Hurst’s judgment and stating that there should be a contractual obligation on the receiving party to account for interest awarded before interest is awarded on those costs.

What can be seen when considering the cases cited above is that there has certainly been a turning of the tide since the decision of HHJ Stewart QC in November 2010 and it appears prior to the handing down of the judgment in Simcoe we had come full circle with the position appearing to be much the same as it was prior to the issue being raised by Paying Party’s. However the award of interest appeared to be contingent on the CFA itself providing a contractual obligation on the claimant to account for any interest awarded to his or her solicitor. So has the judgment of Simcoe v Jacuzzi UK Group Plc altered the position further?

Legal Argument Canvassed in Simcoe

The appellant claimant contended that the District Judge was wrong to hold that interest on the agreed costs should run from the date at which costs were agreed as oppose to from the date of the order for costs for two reasons;

(i) That the amendment purportedly made in April 1999 by CPR 40.8(1) was ineffective so far as the County Court is concerned, and the 1991 Order still applied which mandates that interest is to be paid from the date of the order for costs (the incipitur date).

(ii) If CPR 40.8 does apply, whilst it gave the court a discretion, the normal rule was still that interest is payable from the incipitur date and there is no good reason to depart from the rule in the present case.

The Master of the Rolls split the submissions up into four component parts being (a) was the amendment of April 1999 ineffective; (b) if not, does the 1991 Order (article 2(1) and 2(2)) mandate the payment of interest from the incipitur date; (c) does 40.8(1) contain a general rule that interest on costs runs from the incipitur date; and (d) if so, whether there is any good reason to depart from the general rule in the present case.

The respondent defendant submitted the decision was correct for the following reasons: -

(a) In relation to (a) the defendant contended that the Civil Procedure Act 1997 represented a whole new source of authority for making rules for the County Court, which included rules regarding the payment of interest.

(b) In relation to (b) the defendant contended that the effect of article 2 (1) and 2 (2) of the 1991 Order meant the court has discretion to decide on the facts of the case, what date the interest runs from.

(c) In relation to (c) the defendant contended that the normal rule under CPR 40.8 is that interest runs from the date on which the costs are agreed or assessed – the allocatur rule.

(d) In relation to (d) the defendant contended that the reasoning in Hunt does not apply to cases such as those funded by CFAs and therefore focussed on the differences between the position of a receiving party in the late 1980s and the position of a claimant in the modern day case (where CFAs are readily available).

Court of Appeal’s Decision

Following the conclusion of legal argument, The Master of the Rolls delivered the lead judgment in the case which dealt with the issues in a way which separated out the four discreet issues raised by the Claimant and responded to by the Claimant. It was held that prior to the enactment of the CPR the position in the County Court was governed by s.74 (1) of the 1984 Act where by the Lord Chancellor was permitted, with concurrence of the treasury, to make orders with regards to interest on sums awarded by the Court. The Lord Chancellor obtained concurrence form the Treasury when enacting the 1991 Order but did not when enacting CPR 40.8 and therefore as a result 40.8(1) is rendered ineffective in the County Court.

The Court of Appeal held that the 1991 Order mandated interest was payable from the date of judgment and the only ‘judgment’ reflected is the one which is reflected in the order for costs to be assessed or agreed and in any event “the balance of justice favoured the incipitur rule”.

It was also held that, in any event, the normal rule to be followed under CPR 40.8 is the incipitur rule and for the reasons given by Lord Ackner in Hunt, save for the fact that the claimant had not expended any money in funding the litigation, the starting point that the incipitur rule applies is still case even where the matter is funded by way of a CFA.

Conclusion

It would now appear that there has been much time, effort and money expended in order to reach a position that the parties where at prior to the decision in Gray. However now there is a considered judgment from the Court of Appeal it would be expected that challenges to a receiving party’s entitlement to interest on costs will be few and far between (if any are made at all).

It would appear that the decision in Simcoe removes the court’s discretion to allow/disallow interest and therefore the need to have a contractual obligation that the claimant will account for interest to the solicitor contained within the CFA also appears to have been negated. However the time it takes to insert a term such as the one which was described by Master Hurst in Motto appears to be a small price to pay in order to ensure an entitlement to interest remains intact as it is likely the advice provided by LJ Hooper MR in Simcoe will be followed which will see CPR 40.8(1) become effective in the County Court. This could then re-open challenges made by Paying Parties in cases where the CFA in question does not contain a term as to payment of interest.

CRAIG LEIGH
Compass Costs Consultants Ltd

In a case concerning a minor, settlement is all too often reached using the fictional procedure commonly known as ‘Parental Indemnity’. This is done despite the rules contained within CPR 21.10 which makes it clear that no settlement, compromise or payment shall be valid without the approval of the court. Therefore the Claimant solicitor who settles a Claimant minor’s case by way of Parental Indemnity not only contravenes the rules but also potentially leaves themselves open to an action in negligence.

CPR 21.10 governs ‘compromises etc by or on behalf of a child or protected party’ and the relevant sections are set out below: -

21.10 (1) – Where a claim is made –

(a)   By or on behalf of a child or protected party; or

(b)   Against a child or protected party,

No settlement, compromise or payment….and no acceptance of money paid into court shall be valid, so far as it relates to the claim by, on behalf of or against the child or protected party, without the approval of the court.

(2) Where –

(a)   Before proceedings in which a claim is made by or on behalf of, or against, a child or protected party…..are begun, an agreement is reached for the settlement of the claim; and

(b)   The sole purpose of proceedings is to obtain the approval of the court to a settlement or compromise of the claim,

the claim must –

(i)                 Be made using the procedure set out in Part 8 (alternative procedure for claims); and

(ii)               Include a request to the court for approval of the settlement or compromise.

When issuing a claim for infant approval under CPR Part 8, there are modifications to the general rules regarding issued claims, the most salient of these being CPR 8.9 (c) which states a matter issued by way of Part 8 shall be treated as being allocated to the multi-track and therefore Part 26 does not apply.

This has interesting consequences for a solicitor pursuing a claim on behalf of a minor which settles for less than £1,000.00. Due to the ‘special provisions’ contained within CPR 8.9 the financial limits placed on claims for the purposes of allocation are dispensed with and therefore the usual argument made by a Defendant insurer that the claim was always going to be a small claims case which in turn attracts small claims costs is entirely negated. Also negated is the argument that the claim is subject to the predictable costs regime were the claim arises out of a Road Traffic Accident, however this argument is negated for different reasons, and those will be explained in turn. The consequence being the Claimant solicitor is entitled to claim costs from the unsuccessful Defendant paying party on the standard basis by submitting a detailed bill of costs for assessment in the usual manner.

Turning to the first potential argument regarding small claims, the Defendant’s often cite the case of Coles v Keklick (30^th June 2008). In this case HHJ Stewart QC Sitting on appeal in Liverpool County Court held that the Claimant solicitor was entitled to small claims costs following the Claimant’s claim being settled on the basis that the Defendant pay £250.00 in damages plus costs. Crucially in this case, the matter was settled by way of ‘Parental Indemnity’ and therefore no proceedings were issued under Part 8, the alternative claims procedure, and therefore in turn the provisions in CPR 8.9 were not invoked and the financial limits for allocation contained within CPR Part 26 applied. The judge commented that the whole issue of Parental Indemnity was something that he had not personally come across either sitting as Designated Civil Judge or in Private Practice and as far as he was concerned there had to be court approval of the settlement under CPR 21.10 for the same to be valid. He commented that unless the claim was issued under Part 8 then the track to which it would have been allocated to must have been the small claims track, there being no factors, other than the very fact that the Claimant was a child, upon which it could be said that the small claims track was not the appropriate track.

Where a claim is issued under the Part 8 procedure for Infant Approval the case of Dockerill & Healey v Tullett is much more on point. This was a case which arose out of a Road Traffic Accident which took place on the 20^th July 2007. A claim was made on behalf of the Claimant minor which ultimate settled for £750.00. A Claim Form was issued in February 2009 for the approval of the terms of settlement. HHJ Oliver-Jones QC, sitting in Birmingham County Court came to the conclusion that costs should be assessed on the standard basis under and in accordance with CPR 44.5.  A Defendant may still argue that the Judge on an assessment has the power under CPR 44.5 to award costs commensurate with those allowed under the small claims regime, and that contention cannot reasonably be challenged. However having regard to the fact that CPR 8.9 treats the claim as being allocated to the multi-track, the argument raised is often fatally undermined.

Moving onto the argument that may be raised by a Defendant regarding the payment of fixed predictable costs, this argument is easily answered by reference to the rules contained within CPR 45.7 (2) which relates to the scope and interpretation of the rules governing the fixed predictable costs regime. The relevant rules are set out below: -

45.7 (2) This Section applies where –

(a)   The dispute arises from a road traffic accident;

(b)   The agreed damages include damages in respect of person injury, damage to property, or both;

(c)    The total value of the claim does not exceed £10,000.00; and

(d)   If a claim had been issued for the amount of the agreed damages, the small claims track would not have been the normal track for that claim.

The use of the word ‘normal track’ is defined by CPR 26.6. A normal track for small claims track cases is any claim for damages which includes a claim for personal injuries where the damages are less than £1000.00. Therefore a minor’s claim which settles for less than £1,000.00 equally cannot be made the subject of the fixed predictable costs regime.

In short, the easiest way to avoid any problems in being paid in cases which involve a minor where the damages recovered are less than £1.000.00 is to issue proceedings for infant approval under Part 8. What will follow then is a detailed assessment in the usual manner with the receiving party submitting a bill for assessment, Points of Dispute and Replies being submitted (if appropriate) and a detailed assessment hearing taking place. In our experience the Judge presiding over the assessment procedure will have no alternative but to assess the Claimant’s costs by reference to the relevant rules detailed above and therefore proceed with the assessment on the basis of what is considered ‘reasonable’ by the court.

CRAIG LEIGH

Advocate

The approach that hindsight should not be applied to an assessment of costs is well established.  The Court will consider the claim for costs in light of the facts known to the solicitor at the time and not those facts subsequently discovered.

This approach was summed up by Justice Sachs in the case of Re Francis v Francis and Dickerson [1955] 3 All ER 836:

“When considering whether or not an item in a bill is “proper” the correct viewpoint to be adopted is that of a sensible solicitor sitting in his chair and considering what in the light of his then knowledge is reasonable in the interest of his lay client”

But how is this decision applied practically? If a claim for costs includes elements that were reasonably pursued at the time but ultimately unsuccessful, are Defendants still responsible for the associated costs of this? What about a solicitor who secures multiple medical reports as their client is not in agreement with the initial views of the expert? Are these costs recoverable from the Defendant?

The statement and approach in Francis would appear to suggest that the costs of such items remain recoverable by the Claimant where it was reasonable to incur the costs at the date the work was undertaken. Not surprisingly, most Defendants firmly reject this approach and remain defiant:

Defendants commonly object: ‘The report was not disclosed and therefore the costs can’t be recovered’ ‘This element of the claim was ultimately not pursued and therefore costs associated with it cannot be recovered.’ ‘This element of the claim was unsuccessful and the therefore the costs of it cannot be recovered.’ These objections have been met with some sympathy by the Courts however we can confirm Francis remains very much alive.

We recently tested the issue at a Detailed Assessment hearing in respect of a Claimant who suffered personal injuries as a result of a road traffic accident. The Claimant was medically examined and a prognosis period provided by the expert.  However, the Claimant’s symptoms persisted beyond the prognosis period and further questions were put to the medical expert.  The expert maintained his original report.  The Claimant, in disagreement with the expert over the extent of her symptoms, decided not to disclose the medical evidence to the Defendant and instead sought reports from alternative experts. The additional reports were disclosed to the Defendant and the matter settled.  At assessment, the Defendant objected to paying the fees of the first expert and sought to have all costs associated with this first expert disallowed on the basis that the report was not disclosed.

We successfully argued on the basis of Francis that the fees for the medical report and associated work were recoverable in full from the Defendant.  The District Judge determined it had been reasonable, at the time, for the Claimant’s solicitors to instruct additional medical experts. Accepting the Defendant’s argument would properly amount to an application of hindsight to the assessment which Francis explicitly rules out.

Such decisions vindicate our approach that where a solicitor has acted reasonably and appropriately in pursuing a claim in the best interests of their client, the costs award should properly reflect this.

John Meehan

Advocate

This is a question regularly asked by the Defendant Insurers.

Could a settlement have been achieved without recourse to litigation?  The Court is now often being asked to determine this point, as premature issue is now becoming more prevalent. The protocols impose obligations on both parties to lay their cards openly on the table from an early stage.

At a recent taxation hearing in Luton County Court, the Defendants had alleged that the Claimant had issued proceedings prematurely in circumstances where settlement could have been agreed. The Claimant’s offer in respect of contributory negligence had first been made in November 2009 and was then reiterated at a later date. The Claimant then chased the Defendant Insurer in April and May of 2010. On the 1^st July, a final fourteen days was given for the Defendant’s to accept the Claimant’s offer on contributory negligence. Proceedings were issued on the 15^th July, 2010. The Defendant sent a letter on the 16^th July, 2010 accepting the 50/50 offer. After consideration of the facts, the District Judge decided that the Claimant had not issued prematurely. The Defendant had failed to act and thus the Court view was that “consequences must follow”.

The Claimant’s conduct had been more than reasonable. The bill of costs was then assessed in accordance with the standard basis.

Donna Collins

Advocate

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