An Occasional Look at Recent Costs Cases in Litigation

Lord Chief Justice’s Report 2015

Control over the costs of civil litigation continued to be of the greatest importance. The Jackson review reforms have now bedded down. It appears that there is an improvement in costs management by judges and in costs behaviour by parties. There was sustained emphasis on the need for proportionality between the costs of a case in relation to the value of the claim. However, costs issues continued to be the subject of dispute between parties, and to generate litigation in their own right.

The report covers a number of issues in relation to controlling litigation costs and fees. The report emphasized the adoption of fixed recoverable costs. The report highlighted the judiciary’s support of the application of fixed recoverable costs for fats track and low level multi track cases, in order to keep costs to a minimum.

 

C&S Associates UK Limited -v- Enterprise Insurance Company PLC [2016] EWHC 67 (Comm):  

In this particular judgment the court was asked to determine the issue of costs.

The court discussed the relevance of a Part 36 Offer. The particular issue at hand was the terms of the offer. The judge inevitably ruled that a costs order could not be made without the judge being told the terms of the offer. The terms of any Part 36 Offer would have a bearing on the question of what order for costs should be made. In particular he took in to account two of the following considerations.

  1. The costs of an export report

The judge found that the inclusion of this evidence would not be necessary for the second stage of trial, as argued by the claimant.  The court disapproved of the course taken by the Claimant and the costs of such evidence should not be allowed to spiral out of control, and that a party that deliberately chooses for tactical reasons to adduce expert evidence for which no permission has been granted should bear the risks. The expert report was unnecessary and therefore inadmissible. The claimant was ordered to pay the entire cost of the report.

  1. Bundles

Another aspect that the judge highlighted was the preparation of the trial bundles. Throughout the hearing only one of the bundles was ever opened. It was unreasonable for the claimants to produce 29 bundles. Even the disclosure of the documents had been ordered, there was no logical reason to include to produce ala these documents for each trial bundle. The claimant was liable for 80% of the costs of preparing the bundles.

 

Thomas Ian Sinclair v Dorsey & Whitney (Europe) LLP and others

In this case, Justice Popplewell refused to grant relief from sanction under CPR 3.8 and CPR 3.9.

The claimants were seeking a relief from sanctions under CPR 3.8 and CPR 3.9 stemming from their failure to comply with an unless order to lodge security for costs, within a generous time period. Justice Popplewell held against granting relief from sanctions under CPR 3.8 and CPR 3.9. He based his decision on the fact that they had breached and unless order and they had also failed to fulfil the requirements of the rules.  If relief was granted this would mean that the new approach would be ‘turned on its head’.

The claimants were adamant that there were good reasons for their breach and any refusal to grant relief from sanction would prejudice their claim for £30 million.

Justice Popplewell held that when the court is asked to consider an application for relief from sanctions when a party has failed to comply with any rules, practice direction or court order, it is decisive that all the circumstances of the case are to be considered, in order to comply with the overriding objective of dealing with cases justly and proportionately and the need to enforce compliance with rules, practice directions and orders. By leaving the matters to the very end and only then requesting an extension, was not acceptable. Additionally the court also drew upon a clear history of the Defendant continually seeking security for costs from the claimants and the claimant repeatedly failing to provide. The court agreed with the defendants and ruled that in this instance that refusal to grant relief, especially when an unless order is involved, is proportionate.

 

Bristow v The Princess Alexander Hospital NHS Trust

The judgment highlights the courts willingness to promote ADR. The judgment clearly signals  that parties should be very cautious before refusing an offer to mediate. If unreasonably refused, the court will penalise the party by imposing cost sanctions against them by way of indemnity costs.

Master Simons ordered the NHS Litigation Authority to pay indemnity costs after they ‘unreasonably’ rejected the claimant s offer to mediate. It took them a period of three months to reject the claimants offer.  One of the arguments made on behalf oh NHS was that that the offer to mediate was refused because the parties were ‘so far apart’. The court rejected this argument and emphasised that this was not a viable reason to reject an offer, especially when the court understood the case to be one which could have been settled by mediation.

 

Crooks v Hendricks Lovell Ltd [2016] EWCA Civ 8

The question before the Court of Appeal was whether a party who beats a Part 36 offer in a case where fixed fees are applicable, is also entitled to indemnity costs.

As an overview, under a statutory scheme, generally a defendant to Personal Injury tend to pay a reduced amount of damages to the clamant and then refunds ‘recoverable benefits’ to the state. Therefore it is open to the defendant, when making a Part  36 offer, to specify whether the offer is made ‘without regard to any liability for recoverable amounts’ or ‘intended to include any deductible amounts’.

Hendricks Lovell Ltd offered the claimant, £18,500 ‘net of CRU’, meaning the net of recoverable benefits due to the compensation recovery unit. Judgment was given for £29,550. The recorder also adjourned the costs assessment until after the a review by the CRU of the certificate of recovery benefits. Once the review has taken place and a revised certificate was issued, it was held that the claimant had failed to beat the Defendants Part 36 offer.

The case was then appealed before the Court of Appeal and it was held that the Part 36 was sufficiently valid and it was the defendant’s clear intention that it was to be made ‘without regard to any liability for recoverable amounts’. There was no obligation on the defendant to stat the amount of gross compensation which the claimant would receive.

In addition, the use of the words ‘net of CRU’ in the defendant Part 36 offer meant that the amount of the offer was to be compared with the judgment sum after any corresponding adjustments for recoverable benefit have been made.

The judge also confirmed that the judge correctly waited for the CRU to review before making a decision as to whether the Part 36 Offer had been beaten.

The appeal was allowed and the Court of Appeal held that the Part 36 offer had been beaten by the claimant. In order to determine whether or not an offer had been beaten “one had to look at the net sum paid to the claimant, not the gross sum including monies payable to the CRU” (i.e not the total amount which the defendant had to pay). Once the sum owed to the CRU had been calculated, the claimant received £22,789 as the amount that was net of recoverable benefit, and so had beaten the offer.

 

Yentob v MGN Ltd 2015 EQCA Civ 1292

The lead judgement was given by Lady Justice Arden, and respectively affirmed by, Lady Justice Rafferty and Lord Justice Kitchin. The Court of Appeal has upheld the decision of Mr Justice Mann, and reiterated that the judge applied the correct test in reaching his decision by taking in to account the relevant considerations, and therefore, there was no error of law.

Mr Yentob was awarded £85,000 in damages for the misuse of private information derived from intercepting voicemail messages left on the respondents’ telephone. The Appellants, MGN Ltd, had made a Part 36 Offer: by which a party makes an offer to settle the claim, to the other party. Under the Normal Consequences rule, if a claimant rejects a Part 36 offer, and subsequently at trial the claimant receives judgment for less than the sum the defendant was offering, he will be liable to pay the defendants costs, including the interest accrued form the date at which the time frame to accept the offer expired, until the date of judgment. Therefore, under this rule, the respondent would be ordered to pay MGNs’ costs and interest, from the 13th January 2015.

Mr Justice Mann ruled that the Respondent was not bound by the Normal Consequences of not accepting a Part 36 Offer made by the Appellant, as this would be unjust in the particular circumstances of the case.

The appellant made a renewed application for permission to appeal against Mr Justice Mann’s order for costs. In the Court of Appeal, permission to appeal was granted, but the appeal itself was dismissed. Lady Justice Arden confirmed that the judge was entitled to hold that the case did not fall within that category of ‘normal consequences’ and justice required that the case involved a departure from the normal rule which would otherwise entitle the defendants to their cost.

The Appellants considered this to be incorrect as:

“(1) he made no finding that the usual Order would be “unjust” and instead applied a flawed test of a balance of justice, and

(2) Took into account MGN’s failure to make admissions and other matters which he should have excluded from his consideration of whether the Normal Consequences were unjust”.

Lady Justice Arden found that the Mr Justice Mann had correctly examined all the circumstances, in accordance with CPR 36.17(5), and held that a comparison between the offer and judgment could be included. This was a case in which the party is justified in continuing proceedings, even though a favourable offer has been made. Lady Justice Arden, attached particular weight to the fact that Mr Yentob, had he accepted the Part 36 Offer, would not have been aware of how seriously he had been hacked. This information only came to light during the proceedings.

Additionally, after considering the history of the proceedings, the appellant had only admitted to 2.5 years of hacking, however, through the course of proceedings it was revealed that this covered 7 years. It was therefore mandatory that all circumstances were to be taken in to account, in particular the condition of the Part 36 Offer:

“Suppose that a person to whom a Part 36 offer had been made had asked for clarification or more relevant information and been refused it or the answer misrepresented the position. If that information was material and might reasonably have altered his view on whether to accept the offer, and was information within the offeror’s organisation, the court might well find that it would be unjust to order that the Normal Consequences should follow from non-acceptance”.

The Appellants argued that it is not enough for a party who fails to beat a Part 36 offer to show that the decision not to take up the offer was perfectly reasonable one.  He must show that it was unjust for the Normal Consequence to apply. They also submitted that Mr Justice Mann was wrong to conclude that, the Appellant would not have agreed to a statement in open court in the terms of the judge’s finding against them at trial, especially when they had made such statements in the past.

In response, Lady Justice Arden, accepted the Respondents submissions and held that the only way for an open statement to achieve is purpose was if MGN fully participated in it. After reviewing a previous offer made by MGN to Mr Yentob, there was no evidence of a proposal for a statement in open court. Despite the respondents asking for such confirmation from MGN, the latter did not take up that suggestion. Having regard to this, Lady Justice Arden held that the Judge was correct in raising a ‘serious question mark’ over whether the appellant would have been willing to give a statement in open court, on this occasion.

In finding for Mr Yentob, the Court of Appeal concluded that Mr Justice Mann was familiar with the background of the case. He was therefore correct in holding that the Normal Consequences would be unjust and this conclusion was based on relevant considerations. There was no error of law.

 

Involnert  Management Inc v Aprilgrange Limited & Ors [2015] EWHC 2834

The case confirms that interest at the Judgment act rate starts to run from three months after the date of the costs order.

CPR 40.8 provides:

  1. Where interest is payable on a judgment pursuant to section 17 of the Judgments Act 1838 or section 74 of the County Courts Act 1984, the interest shall begin to run from the date that judgment is given unless –
    1. a rule in another Part or a practice direction makes different provision; or
    2. the court orders otherwise.
  2. The court may order that interest shall begin to run from a date before the date that judgment is given.

The question before the court was extent of the courts discretion under CPR 40.8 (1)(B). Involnert argued that the interest payable under the Judgments Act should run from 6 months after the date of judgment.

In judgment, Leggatt J found that, on the authorities, it was’ clear that the date when an order for costs is made is the date judgment is given… even though the amount of costs payable has still to be assessed’, however he confirmed that the court has the discretion to choose the date on which it can order costs to run and, importantly, found that it is not necessary to show any ‘exceptional’ circumstances in order to do so. In effect it was held that the date from which interest shall run is at the sole discretion of the court.

The effect of this judgment is that the court has held that interest on costs should not run until 3 months after the order for costs. The date of 3 months was arrived at because CPR 47.7 states that detailed assessment must be commenced (and a bill of costs served) no less than 3 months after the date of the judgment or order. Exceptional circumstances are not mandatory in order for interest to run form a different date, but the court emphasized the importance of the overriding objective when exercising its discretion  under CPR 4.8 (1) (b).

2017-10-05T09:53:42+00:00 February 3rd, 2016|News|0 Comments