Costs Update June 2015
APPLICATION TO INCREASE COSTS BUDGET AT TRIAL REFUSED
The developing case law in respect of Costs Budgets has already established that parties should apply to amend to their costs budgets as soon as they know that they will be exceeded and that applications to amend after a case has concluded are not permissible (Excelerate Technology Ltd v Cumberbatch & Ors – see our last Costs Update) so what about an application to amend a costs budget at the final Trial of a claim?
In the case of Jonathan Parish & Brian Ogden v The Danwood Group Limited  EWHC 940 (QB) the Defendant successfully resisted a claim for deceit and/or misrepresentation arising from the sale of shares. Costs were awarded to the Defendant, who made an application to increase three phases of its last approved costs budget. The trial Judge, HHJ Behrens, sitting as a High Court Judge, dealt with the application and made the following decisions:-
1. Disclosure – The Defendant sought an increase of £8,938.00 said to have arisen due to the volume of the Claimant’s disclosure and the Claimant’s application for additional disclosure. In respect of the application for additional disclosure, the costs had been reserved to trial following refusal of the application and so the Judge now awarded those costs to the Defendant and they would be assessed separately to the main costs and did not require an increase in the costs budget. As to the volume of the Claimant’s disclosure, the Judge noted that the disclosure was limited and in accordance with the Claimant’s Disclosure Report so he was not satisfied that it was appropriate to increase the budget in relation to Disclosure.
2. Witness Statements – The Defendant’s approved budget was £47,071.00 based on an assumption of four witness statements. In the event, five Witness Statements were exchanged and the Defendant sought an increase of £10,000.00. The Judge agreed with the Claimant’s submission that the Witness Statements were not long and that there had been no significant developments in the litigation compared to the position as it existed in June 2014 (presumably when the budgets had been approved). Accordingly, the Judge saw no reason to increase the budget in relation to Witness Statements.
3. Experts – The Defendant’s approved budget for Expert evidence was £20,000.00, which was set before the expert had been identified. However, the expert’s fees now came to £69,864.00 so an increase of £49,864.00 was sought. The Judge considered that the increased fees had arisen as a result of the instructions to the expert going beyond what had been permitted by the specific order allowing the instruction of that expert so this increase was also refused.
Interestingly, the Judge did not make any mention of the fact that the Defendant had obviously exceeded his last approved budget by some margin but had not sought to amend the same by agreement or application before the Trial. If the amendments had been sought before or soon after the increases were incurred it is possible that the Defendant may have fared better or at least would have been on notice that the additional costs would not be recoverable.
TRIAL NOT COMMENCED FOR PURPOSE OF 100% FIXED SUCCESS FEE
An issue that has raised its head from time to time is whether a claim has concluded after the commencement of a trial for the purpose of fixing the success fee at 100% under the pre-April 2013 CPR 45. There have been a string of reported cases dealing with the point involving various scenarios but it seems the issue is still being argued.
In Colin James v David Andrew Ireland  EWHC 1259 (QB) the Defendant appealed against the finding of Costs Master Campbell that the trial of the claim had commenced so that the Claimant was entitled to a fixed success fee of 100%. The claim had been listed for a three day trial on liability and quantum but on the morning of the first day the Claimant applied to adjourn the trial of quantum, which was opposed by the Defendant. Judgement on that application was given after lunch when the Judge adjourned the trial of the quantum issue only and indicated that there was no reason why the trial on liability should not then proceed after a short adjournment of 15 minutes. Following that adjournment, the parties applied by consent to adjourn to the next morning due to some late disclosure that needed to be considered. The following day the Claimant applied to stand the case out until 2pm and there was some discussion and consideration of documents in relation to the reasons why the case should be stood out. When the hearing re-convened at 2.00pm the Claimant applied to stand the case out to deal with the issues that had arisen including the possible need to obtain additional witness evidence and there were discussions regarding the re-listing. The Judge also asked the Defendant to confirm his position in relation to the issues being pursued in respect of contributory negligence before standing the case out. The claim then settled before the matter came back to Court.
In her Judgement, Slade J, sitting with Costs Master Haworth as an assessor, relied on similarities withGandy v King  EWHC 90177 (costs) where it was found that exchanges in Court on the first morning and a subsequent adjournment had not amount to the commencement of the trial. She went onto say :-
“The 100% percentage increase is payable when a settlement is reached after the commencement of the final contested hearing, or in this case, contested hearing of the liability issue. It is not triggered by the commencement of any hearing of whatever nature related to the contested liability hearing. In this case there may be hearings before the start of the contested hearing of the liability issue to deal with evidence and other case management matters. Whilst the hearing before Mr Justice Griffith Williams which started after his judgment on the adjournment of the quantum issue was related to the trial of the liability issue, it was to put back the start of the hearing of that issue and then to take it out of the list. The hearing which took place from the afternoon of 8 June and on 9 June 2011 was not the contested hearing of the liability issue within the meaning of CPR 45.15(6)(b). The sequential proposals to put the case back, first to 10.30am on 9 June 2011 and then to 2pm on that day were analogous to the facts considered in Gandy. Whilst such requests can be made after a trial has started, that was not so in this case. In my judgment Master Campbell erred in treating the start of a hearing related to the liability issue concerned with when the trial would start as the start of the contested hearing of that issue”
Accordingly, the claim had settled before the trial had commenced and the fixed success fee would not be 100%.
SENIOR COSTS JUDGE WRONG NOT TO AWARD RECEIVING PARTY 10% OF ASSESSED BILL FOR BEATING HIS OWN PART 36 OFFER ON COSTS
Since April 2013, the rules in relation to Part 36 offers (with some modifications) have applied to Detailed Assessment proceedings, including the provision for a receiving party to be awarded an additional 10% of his assessed bill if he equals or betters any Part 36 offer he made. The High Court has recently considered the issue of whether it would be unjust to make such an additional award when overturning a decision of the Senior Costs Judge.
In the case of Michael Richard Ashman v Mid Essex Hospital Services NHS Trust  EWHC 1312 (QB) the Claimant had served a bill of about £262,000.00 and later made a Part 36 offer to accept the sum of £152,500.00. The Bill was later assessed by Senior Costs Judge Gordon-Saker in the sum of £176,693.78 and he then considered whether to make awards under CPR 36.14(3). Whilst he felt it would not be unjust to require the Defendant to pay enhanced interest on the bill, costs of the assessment proceedings on an indemnity basis and enhanced interest on the costs of detailed assessment, he felt that it would be unjust to award the Claimant 10% of the assessed bill, being approximately £17,000.00. Giving his reasons for this decision, he said:-
"6. I think costs have to be treated slightly differently to judgments. Generally, the only issue on detailed assessment is how much. Had the rule permitted me to allow a figure fixed by applying the prescribed percentage to the difference between the sum which the claimant offered to accept and the sum which was allowed, then I think that may have been a just result, but that is not what the rule anticipates. In circumstances where there has been a significant reduction in the claimant's bill, it seems to me that it would be unjust to reward the claimant with an additional amount prescribed by 36.14(3)(d)."
Sitting with Costs Master Campbell as an assessor, Slade J considered that the Senior Costs Judge had fallen into error in regarding the reduction in the bill total alone as sufficient reason to make the 10% award unjust and also for making an exception not because he felt that the award of an additional amount itself was unjust but because the amount prescribed by the rules was too much. Giving her Judgement, Slade J said:-
24. The reason given by the Master for holding that it would be unjust to 'reward' the Claimant with the additional amount prescribed by CPR 36.14(3)(d) was the size of the additional award. The Master considered that had the rule permitted him to award a figure fixed by applying the prescribed percentage to the difference between the sum which the Claimant offered to accept and the sum which was allowed on assessment, that may have been a just result. The reason the Master held it to be unjust to make the additional award was because there was a significant reduction to the Claimant's bill of costs. The approach adopted by the Master penalises the Claimant for making what turned out to be a reasonable Part 36 offer. It is the terms of the Part 36 offer not the level of the sums claimed in the bill of costs which are to be considered under CPR 36.14(4). Whilst all the relevant circumstances are to be considered in deciding whether it would be unjust to make an award under any of the paragraphs of CPR 36.14(3), it was not suggested that there was any particular feature or consequence of the bill of costs other than its size which would render the making of an order under CPR 36.14(3)(d) unjust.
25. The making of an order of the level required by CPR 36.14(3)(d) was decided as a matter of policy as explained in the Jackson Report. Under the previous regime it was considered that a claimant was insufficiently rewarded and the defendant insufficiently penalised when the claimant has made an adequate part 36 offer. In my judgment the Master fell into the temptation referred to by Sir David Eady in paragraph 61 of Downing of making an exception by not making an award under CPR 36.14(3)(d) not because he considered the making of such an award unjust but because he thought it unjust to make an award of the required amount, 10% of the assessed costs. The Master considered it would not have been unjust to award an additional amount based on the difference between the Part 36 offer and the sum of costs allowed on assessment. However this is not the regime specified in CPR 36.14(3)(d). In this case it is the Claimant who has been penalised for making a reasonable Part 36 offer rather than the Defendant for not accepting it. In my judgment that approach is contrary to the intent and effect of CPR 36.14(3)(d).
26. As he stated, Master Gordon-Saker was dealing with fairly new provisions in CPR 36. His judgment was given extempore. However, whilst recognising his expertise in matters of costs I have concluded that he erred and the appeal is allowed.
The additional sum awarded under CPR 36.14(3)(d) is meant to be penal in nature and the fact that the receiving party may have submitted an “inflated” bill is irrelevant if they then make a Part 36 offer for a reasonable amount which the paying party rejects and the offer is exceeded at assessment.
NO STAY OF SUMMARY ASSESSMENT WHEN INDICATION OF APPEAL GIVEN, COSTS NOT DISPROPTIONATE
Is an Appellant’s intention to seek permission from a higher Court to pursue a second appeal a “good reason” not to summarily assess costs at the conclusion of an appeal hearing that has lasted not more than one day and are costs of around £10,000.00 disproportionate in a claim that was issued for a sum less than £15,000.00?
In the case of Axton v GE Money Mortgages Limited(1) & The Money Group (Cornwall) Limited (2)  EWHC 1343 (QB) the Claimants were pursuing a claim relating to the alleged mis-selling of PPI against two Defendants but the First Defendant obtained an order for summary judgment dismissing all of the claims against it. The Claimants appealed against that summary judgment but the appeal was dismissed by Swift J. The First Defendant was awarded its costs and as the hearing of the Appeal had lasted no more than one day those costs were due to be summarily assessed. However, the Claimants indicated that they intended to seek permission from the Court of Appeal for a second appeal and would also seek an order for a stay or any costs order against them pending determination of the second appeal. In the circumstances, the Claimant’s submitted that rather than carry out a summary assessment that “might ultimately be futile” it would be more efficient and proportionate to adjourn the assessment until the result of the appeal had been determined. They also suggested that adjourning the summary assessment would allow the parties to see if they could agree the sum for costs which would then avoid the need for a summary assessment if the appeal failed. The First Defendant contended that the costs should be summarily assessed in the usual way.
In her judgement, Swift J did not consider that an intention to pursue an appeal and apply for a stay was a good reason not to carry out a summary assessment in accordance with the rules. If it were, every losing party wishing to avoid a summary assessment and delay payment of costs could indicate that they intended to appeal. Also, a summary assessment is best carried out immediately whilst the circumstances are fresh in the mind of the Judge who has heard the case whereas an adjournment could lead to the assessment taking place long after the event and possibly by a different Judge if the appeal failed. Further reasons given for not adjourning the assessment were that such an adjournment would effectively act as a stay of the assessment when the rules state that an appeal will not act as a stay of the judgment of the lower court without further order and there was no application before the court accompanied by reasons for such a stay. In addition, the Judge felt that any decision with regard to a stay in this case would be better left to the Court of Appeal who could consider any application and grounds and balance any prejudice to the parties. Finally, the Judge considered that a summary assessment was a straightforward exercise that would not result in any significant waste of Court resources in the event that it did prove to be “futile” so she would proceed with the summary assessment forthwith.
In the course of the summary assessment, the Claimants raised a number of specific objections to items in the First Defendant’s statement of costs and some minor reductions were made that reduced the claimed costs to £10,395.60. The Claimant’s submitted that this figure was not proportionate to the value of the claim, which had been stated on the claim form to be less than £15,000.00, and therefore the Judge should reduce the total amount of the costs further. The Judge dismissed this point as being without any merit. Whilst the costs were high compared to the stated value of the claim, the Claimants chose to bring the claim for a modest amount and then to appeal against the summary judgment. It would be unfair to penalise the First Defendant on the grounds of proportionality for successfully fighting the claim and appeal. Also the case had a wider significance for the First Defendant and they were entitled to defend their position.