Page 1

N 2020 Issue 27 | DecJ A2017

INSIDE THIS ISSUE

02 What’s been happening at Kain Knight and what to expect in 2020 04 All our yesterdays: LegalTech from the 1980s to Now 06 Guideline Hourly Rates 09 Empowering the Claimant and levelling the playing field 10 CPR 36.17(4): what is sauce for the claimant goose is not sauce for the defendant gander

LEADING THE WAY


2 |

KAIN KNIGHT INBRIEF

An update from Matthew Kain: What’s been happening at Kain Knight and what to expect in 2020

Kain Knight Exhibited at the Clinical Negligence Debate at the Midland Hotel in Manchester on 28 February 2019

Kain Knight hosted a Costs Update Budgeting & Funding seminar on 22 May at the St Austell Business Centre

On 14 March we attended Hodge Jones & Allen’s ‘Fizz & Fromage’ event in aid of The British Lung Foundation

On 6 June 2019 Kain Knight collaborated with Lawshare and VFS Legal Funding delivering a seminar which covered ‘Costs Developments & Funding in the Modern Law Firm’

Team Kain Knight took part in the London Legal Walk on 18 June 2019

Kain Knight exhibited at the AVMA Clinical Negligence Conference in Leeds on 28 June 2019

On 11 October 2019 we delivered a Costs Update Breakfast Seminar to our London Clients with guests speakers George McDonald (4 New Square), Tony Guise (Disputes E Filing) and Colin Campbell (retired Costs Judge)

Kain Knight’s Manchester office enjoying their Christmas Party!

Seminars, Events & Costs Updates:

Some of Kain Knight's valued team

New Office: Head Office, Stansted

If you wish to be signed up to our mailing list to receive details of upcoming Costs seminars, book an in-house Costs seminar, be invited to exclusive events, or to receive Costs updates, please register your interest by emailing our Marketing & Advertising Manager Helena Marrington at: helena.marrington@kain-knight.co.uk.

New Office: London City, Holborn

New Office: North & Midlands, Manchester

Welcome to the New World! There have been many changes here at Kain Knight, and in the Costs world in general throughout 2019. We have successfully moved from our Bishop’s Stortford Head Office to a new premises in Stansted, and relocated our London Wall office to Summit House in Holborn, and finally, but not least, we have taken an even larger premises in Manchester! Our office moves have given us the opportunity to continue to upgrade our infrastructure, IT and operational facilities to ensure greater security and more efficiencies. The business has been transformed and we are already seeing very positive effects. We are proud to share that we have welcomed a substantial number of new skilled Costs Lawyers to join our business this year, and we remain actively engaged with future candidates to continue to build our winning team. Kain Knight has been a pioneer in the Costs industry for more than 43 years, and our track record continues to help us win and maintain a prestigious portfolio of clients across the UK and beyond. There are a number of new and exciting clients that we have built strong relationships with that we are excited to nurture through 2020 and beyond. Thank you to all who have supported and worked with us over the past year. We value your custom as ever and are excited to see what 2020 brings!


| 3

Kain Knight N&M Update Kain Knight City Update Kain Knight Success in the Court of Appeal Nick McDonnell and his team in Kain Knight’s Manchester office have had their second success in the Court of Appeal in two years (the first being Khaira & Ors v Shergill & Ors [2017] EWCA Civ 1687 (27 October 2017)).

West & Demouilpied v Stockport NHS Foundation Trust [2019] EWCA Civ 1220 (17 July 2019) saw Kain Knight at the centre of the recoverability of post 1 April 2013 clinical negligence ATE premiums. Nick McDonnell and Gary Redfern led the charge resulting in successful appeals before the Master of the Rolls and LJs Coulson and Irwin. As well as ensuring the full recovery of most Post-LASPO clinical negligence ATE premiums claimed, West has also established itself as the lead authority guiding costs judges when considering whether costs are proportionate.

In under half a year since the move into the new office, the prestigious Summit House in Red Lion Square, a further fresh face is imminently joining the team headed up by Francis Kendall. Ben Chowdhury, a Costs Lawyer and our Managing Associate, has been with the team since the office move and was joined shortly thereafter by Kelly Line – the very last of the Trainee Costs Lawyers before the ACL’s recent reintroduction of the training course. Ben Wilson, another Costs Lawyer with an impeccable reputation, joins us shortly and Emilie Woolley, a qualified solicitor, has consulted with us throughout. The importance of this London presence is key to Kain Knight maintaining and continuing to develop its national reputation as being a pioneer in the costs industry. It is fundamental for any major costs firm, especially the only Band 1 firm (as voted by Chambers & Partners Legal Directory), to have a City presence.

Kain Knight Shortlisted in the 2019 Personal Injury Awards As a consequence of leading the West & Demouilipied cases to success in the Court of Appeal, Kain Knight were shortlisted for ‘Outstanding Case of the Year’ at the Personal Injury Awards 2019. Unfortunately, Kain Knight were pipped at the post by Hugh James Solicitors for their work on Inglis v Ministry of Defence [2019] EWHC 1153 (QB) where the court assessed the damages due to the claimant, a former Royal Marine, for the hearing loss he had suffered as a result of exposure to noise while serving in the Armed Forces.

The award criteria: · Entries from lawyers who had worked on exceptional cases that resulted in a precedent setting judgement under challenging circumstances; · Nominations which concerned cases which have had a demonstrable impact on the wider industry; Nick McDonnell

The office will soon be a team of six and has maintained growth in instructions with a variety of work adding to the core of budgeting and assessment. Together with new clients, they have also been servicing existing clients, building new relationships with the new team to ensure they continue to benefit from Kain Knight’s expertise. They have also transitioned a significant number of clients that are new to working with Kain Knight to include several projects afoot in the First Tier Tribunal for major accountancy firms. The costs in these claims is approaching £5 million and these have been a significant element of the work undertaken in the last few months. For projects of this size they need to adopt a team approach and benefit from close working and personal relationships throughout the team. All of this has been achieved without the need for any direct marketing to have been undertaken. With the upward trend continuing into the new decade Kain Knight are planning on a very successful London Office which, together with the original Kain Knight London personnel of Chris Butler and John Staab, will continue to be the “go to” Costs experts in the City. Francis Kendall

W W W. K A I N - K N I G H T. C O . U K


4 |

KAIN KNIGHT INBRIEF

All our yesterdays: LegalTech from the 1980s to Now

L

egalTech is technology that supports legal processes and this article is concerned with LegalTech for civil litigation in England and Wales. The article reflects the author’s perspective as someone who has for the past 25 years been and remains at the heart of developments in civil justice reform and LegalTech.

When I came to practice Law in the mid-1980s change did not happen. Since the 1960s Court procedure had been set out in the Rules of the Supreme Court, 1965(the RSC) and barely altered from one edition to the next. LegalTech had not yet been dreamt of. What technology existed was confined to a few devices which had not much changed for a century. Stasis was the order of the day providing a stable market in which litigators plied their profitable trade. The Telex machine sat gleaming in a corner and was managed by a Telex Operator who was conversant with the mechanism and the language which chattered in and out of it – Telex was a wonderful world of its own. The telegram and the telephone were well established although it was only 15 years earlier my family acquired a telephone in my childhood home, the first to do so in our street. Mobile telephony was the stuff of science fiction.

Statements). A mistake or second thoughts during the typing of an Affidavit caused the re-typing of it all; wasting time and sapping the will to live. Accurate typists were highly prized! Then came a striking innovation in typing: IBM’s Selectric typewriter using their type ball or, as they were commonly called, golf ball typing element; only the elite typists were allowed to use this ground-breaking technology. Affidavits had been in use for centuries and continued to be sewn in three points (don’t ask) along the left hand margin into book form (pursuant to RSC O. 41 r. 1(5)) on paper “of proper substance” (note 41/1/4) thus forbidding the use of that other innovation – the staple. Limited technology saved only limited time and wasted as much time as was saved because these innovations were only partial transformations. But in a litigation world which had only just shed its 1960s image as the Cinderella of disciplines no-one was counting wasted time. The litigation world of the 1980s was paid for by the chargeable hour.

Limited technology saved only limited time... Then came a technology which began the transformation of civil litigation the facsimile (fax) machine.

The photocopier had only recently emerged from the wet ink of the Xerox machine into something resembling the photocopiers of today. The Typing Pool became a cacophony when in full strike as the typewriter still looked and sounded as it had when commercially toward the end of the 19th century. Carbon paper between top sheet and copy led to an entire industry of error correcting fluids (e.g. Tippex) and mistakes cost time. This was especially so when preparing Affidavits (almost entirely replaced by Witness

Then came a technology which began the transformation of civil litigation - the facsimile (fax) machine. A device which took the photocopier concept and attached it to a telephone line. The communication of images became possible, but faxes had to be accompanied by a hard copy in the DX or post as the faxed images faded after a while. The 1988 edition of the White Book made no mention of fax machines. The first mention of faxes in the Rules came in the supplement of 1990 at 65/5/7, referencing obiter dicta of the Court of Appeal in Ralux NV/SA v Stephen Mason (The Times. 18.05.89) noting in sombre terms: “difficulties might arise which had not been fully argued”. That was the state of the civil litigation market and LegalTech toward the end of the 20th Century. Then someone developed something that changed everything.


| 5

The commercial spread of the internet and email was slow at first. Only forward-looking firms began to use email via CompuServe. CompuServe relied on email addresses comprising long numbers, not practical. By the turn of the century secretaries were being made redundant or upskilled into other roles as the rush to change from typewriters to word processing programs began. Change begets change and the internet and digital technology drove a furious pace. LegalTech suppliers to private practice were taking full advantage of the possibilities the internet afforded. Email became the normal way of communicating. Faxing took a little longer to die out and hard copies still flew around, at additional cost. Then floppy disks followed by hard disks were sent by courier and returned by courier with different versions of documents added as the disk flew to and fro. This was considered the cutting edge of technological advance at the time. When it was realised such disks might harbour viruses firms and Chambers began scanning them before inserting the disk into a desktop computer. The practice of sending disks via courier ceased as documents began to be attached to emails. The profusion of LegalTech programs is, like the business model of most law firms, profoundly unsustainable. This is because of the Innovation Irony: the more disconnected products one uses the less efficient law firms become. None of these products talk to each other and none enable dispute resolution to gain efficiency. What a strange brave new world. Digitally enabled yet slower than ever. As with containerisation of the freight shipping industry in the 1950s and 1960s, it was only when an entire process is streamlined that the full efficiencies (and maximum profits) are achieved. In turn such streamlining enables more freight to be shipped and more disputes to be handled. For LegalTech that means Platformisation as the key to future business success.

key component. Three recent reports of the Civil Justice Council recommend more mandatory ADR which, when coupled with the wider introduction of Fixed Recoverable Costs (FRC), mean law firms’ business model founded as it remains on charging the maximum number of hours per case is unsustainable. Thus LegalTech and ADR are coming together after travelling long and winding roads. Platformisation means putting the ADR process on a single LegalTech Platform (via DisputesEfiling.com, DEF) to maximise profit. DEF enables Pre-Action activity and the full range of ADR including: arbitration, mediation, evaluation and adjudication. The DEF Platform grows profit margins by undertaking more cases more efficiently. To illustrate this: the mixed bag of LegalTech and paper based process in the Senior Courts Costs Office means 14 months can pass between the start and end of a detailed assessment. In contrast using DEF and Costs ADR a law firm can upload its bundle and settle its costs claim within 28 days. That is what LegalTech is for – solving real world challenges to make cash flow. Tomorrow, and tomorrow, and tomorrow – the rhetorical question in Macbeth’s famous soliloquy resonate in today’s LegalTech and dispute resolution market. Adapt now! Tony Guise is Director of DisputesEfiling.com the leading provider of efiling platform for the collaborative management of ADR and a Past President of the London Solicitors Litigation Association Tony Guise 07716 146 796 tonyguise@disputesefiling.com

The other development which has become prominent since the mid-1980s is Alternative Dispute Resolution (ADR) which simply did not exist in England and Wales in the 1980s. The slow evolution of ADR really began in the 1990s kick-started by compulsory Construction Adjudication in 1996. This was followed by compulsory MIAMs and mediation in Family cases in the early 2000s. A recent decision of the Court of Appeal permits compulsory neutral evaluation (see Lomax v Lomax [2019] EWCA Civ. 1467 and rule 3.1(2) (m) of the Civil Procedure Rules 1998). Two new Portals being introduced by HMCTS in the next 12 months each have compulsory or opt-out mediation as a

W W W. K A I N - K N I G H T. C O . U K


6 |

KAIN KNIGHT INBRIEF

Guideline Hourly Rates – where did it begin, and where are we now?

W

hen it comes to the assessment of hourly rates on the standard basis, the Court will only allow costs which have been reasonably incurred and are reasonable in amount (CPR 44.3(1) and (2)); and only allow costs which are proportionate to the matters in issue (CPR 44.3(2)). The GHR were originally intended to assist judges who were faced for the first time with the task of making a summary assessment of costs at the end of a short hearing, being the obligation put upon them by the Woolf reforms and the implementation of the CPR. Pre-reform, some guideline on hourly rates did exist, but those were collated locally by district judges and later communicated to the SCCO for publication. But it was the introduction of the CPR, and the widespread task of summary assessment, that led to a call from the judiciary for guidance and, in response, the SCCO published periodically (until 2006) its guide to summary assessment and the GHR.

In 2005, the Civil Justice Council (“CJC”) in its paper “Improved Access to Justice – Funding Options & Proportionate Costs”, recommended the creation of ‘The Costs Council’ in response to what it considered to be a developing “costs industry” driving satellite litigation of arguments about the costs of arguments about costs, which it considered to be “an undesirable barnacle on the civil justice system”. The Costs Council was to: “…have responsibility for deciding annually after consultation and by reference to objective economic criteria, appropriate guideline hourly rates allowable between the parties on a fair and reasonable basis…” The language used clearly indicates that what was intended was a prescribed set of hourly rates, seemingly removing any element of discretion from the assessing Court and thereby altogether removing any scope for argument. However, the proposals for The Costs Council were not implemented. In 2007, the Master of the Rolls (as head of Civil Justice) took on responsibility for publishing guideline hourly rates. In 2009, bands were based on the recommendations made by the then Advisory Committee on Civil Costs (ACCC). In 2010, the GHR were updated on the basis of inflation (as recommended by the ACCC) only as an interim measure. However, the Master of the Rolls did not accept the same recommendation in 2011 in the absence of a broader base of evidence from practitioners. The responsibility for recommending GHR was transferred by the MoJ from the ACCC to the CJC’s Costs Committee. However, since 2010, the GHR have not been updated. The GHR have only ever been intended to be a starting point on summary assessment, and only ever a “guide”. The fact that the CJC’s 2005 proposal was not accepted only serves to underline the non-prescriptive nature of the GHR and the preservation of the Court’s discretion. They were not intended to be rigid and were certainly not intended for detailed assessment. Further, the GHR do not distinguish between different types of work, perhaps reflecting their original purpose: to assist judges at the end of short hearing in mainstream civil work governed by the CPR. Nonetheless, experience suggests that the GHR


| 7

convey a strong sense of magnetism in every case, no matter the type of work and no matter whether the assessment is summary or detailed.

It might be thought that a sensible response to the question of “what is a reasonable profit margin” is that it is whatever is dictated by the market. Usual market forces balancing efficiencies, healthy competition for work, maximising profit, and so on, will surely elicit the correct answer to that question. And, therefore, isn’t it quite right that the GHR should only reflect what the actual rates are in the market so that the concepts of reasonableness and proportionality are left in the hands of the assessing Court?

On 28/07/14, the Master of the Rolls issued a paper on GHR (referenced above). It becomes clear that the task for the Costs Committee is to produce evidence-based recommendations as to what the GHR should be. The approach has been to focus on the “expense of time” approach to which will be applied a reasonable profit margin. By assessing salaries, billed hours and overheads, As I understand it, the Costs Committee was largely without all in relation to grade of fee earner and geographical location of financial resource when it was tasked to survey and analyse the firm, the “expense of time” produces the break-even figure the market. Together with the profession in large part refusing per fee earner. This process necessarily to engage, the Costs Committee had involves surveys, cooperative participants, an impossible task. Is it any wonder gathering data, analysis and assessment. that the Master of the Rolls refused to “…It is also important to A judgment is then made as to a reasonable endorse a further set of guidelines? emphasise that the guidelines profit margin, and by adding the “expense of It is in everyone’s interest to have were originally intended to be time” to the “reasonable profit margin”, the guideline hourly rates. It is in the broad approximations of actual result is the recommendations for the GHR consumer’s interest to know that there rates in the market. As Sir Rupert to the Master of the Rolls. is a measure of protection through Jackson noted in his Final Report But the paper went on to note this: assessing Courts and it may even on Review of Litigation Costs assist them at the time of contracting “the aim of the GHR should be to “…It is also important to emphasise that with the legal profession. It is in the the guidelines were originally intended to reflect market rates” profession’s interest to be clear about be broad approximations of actual rates in the rates at which it operates for a the market. As Sir Rupert Jackson noted consumer and indeed it would assist in his Final Report on Review of Litigation in the recovery of that rate, consumer Costs “the aim of the GHR should be to reflect market rates” satisfaction and surely alleviate a large (Chapter 44, paragraph 3.12).” proportion of satellite dispute. And of There thus appears to be a contradiction course the Courts require guideline hourly in approach. If the intention is to strictly rates so that a harmonised and relevant preserve the Court’s discretion in applying starting point to assessment is utilised, the principles of reasonableness and ensuring confidence in that process for all. (even) proportionality in order to control In order to collate the data, a mandatory (conditional to the costs (at least between-the-parties), then issuing of a practice certificate) survey (easily anonymised much why is the Costs Committee being tasked like the gathering of data on diversity) of solicitors and barristers with performing another tier of what appears to be control by (no doubt through their professional bodies) is required. Given substituting its own view of a “reasonable profit margin”? In recent calls for price transparency from the SRA and the BSB, any event, one asks rhetorically, “reasonable” to whom? One one would hope that such a proposal could only be welcomed. might respond, “Well, to the Costs Committee, of course”. But Such a survey need not be extensive as the intention of the GHR knowing full-well the composition of the Costs Committee (and is for matters in which only summary assessment is appropriate. holding the utmost respect for the individual members), why But the surveying points might be: practice areas by reference to are they collectively best placed to dictate “what is a reasonable where Court business is mainly conducted (type of Court as well as profit margin”? Shouldn’t the concept of reasonableness be broad location); level of fee earner; and composite rates charged. a connection to the case in question, and if so, then the lens of reasonableness should be applied by the assessing Court. Such data could help practitioners particularly in specialist fields continued... Sources: https://www.judiciary.uk/related-offices-and-bodies/advisory-bodies/cjc/working-parties/guideline-hourly-rates/ghrsurveyfaq/ https://www.judiciary.uk/wpcontent/uploads/JCO/Documents/CJC/Publications/CJC+papers/CJC+Improved+access+to+Justice+-Funding+options+and+proportion ate+costs.pdf https://www.judiciary.uk/wp-content/uploads/2014/07/ghr-mor-decision-july2104.pdf First published in TGC Costs Newsletter

W W W. K A I N - K N I G H T. C O . U K


8 |

KAIN KNIGHT INBRIEF

The Hourly rates claimed by the defendant must be considered together with the time spent on necessary work to assess overall reasonableness of the costs incurred.”

at summary assessment and all practitioners even at detailed assessment to produce evidence of comparable rates in the market in order to direct the Court to a “starting point” on hourly rates. In the absence of that evidence being brought to the Court’s attention, the vacuum in which hourly rates are assessed at summary assessment in a specialist field or at any detailed assessment is likely to be preserved and the risk that assessed hourly rates have no bearing to market reality continues. Evidence of market rate will not only assist at assessment; it will have a knock-on effect of educating practitioners and judiciary of the market reality when budgeting costs too. Assessing Courts have from time to time expressed their own frustration. A most recent example, perhaps best known for the headline “£786 for a Grade B”, is the case of Ohpen Operations UK Limited v Invesco Fund Managers Limited [2019] EWHC 2504 (TCC), per O’Farrell J. Most interesting of all issues was the fact that the parties had agreed that proportionality was not in issue (such soothing words, readers may think). In summarily assessing the costs of an application in which the winning defendant’s costs were £52,000 odd, and the claimant’s costs were £45,000 odd, the judgment records:

proper and efficient conduct of the litigation. Solicitors providing such skill and expertise are entitled to charge the market hourly rate for their area of practice. The hourly rates charged cannot be considered in isolation when assessing the reasonableness of the costs incurred; it is but one factor that forms part of the skill, time and effort allocated to the application. It may be reasonable for a party to pay higher hourly rates to secure the necessary level of legal expertise, if that ensures appropriate direction in a case, including settlement strategy, with the effect of avoiding wasted costs and providing overall value.

The hourly rates charged cannot be considered in isolation when assessing the reasonableness of the costs incurred; it is but one factor that forms part of the skill, time and effort allocated to the application.

“Although the value of the case is not particularly high for this Court, the technical nature of the dispute justifies the engagement of solicitors with the appropriate skill and expertise to ensure

…The Hourly rates claimed by the defendant must be considered together with the time spent on necessary work to assess overall reasonableness of the costs incurred.” I should say that I am not advocating a control-free zone on costs. Firstly, I wonder whether the market will control itself anyway. But secondly, all I am suggesting is that the function of reflecting reasonableness should not be confused with the function of proportionality, and that it should be for the Court to find the balance of that criteria in any given case knowing that it has the best information to begin with.

Shaman Kapoor Barrister at Temple Garden Chambers 1 Harcourt Buildings, Temple London, EC4Y 9DA 020 7583 1315 sk@tgchambers.com


| 9

Empowering the Claimant and levelling the playing field

L

egal funders have been around for several years, but recently their importance is more widely recognised in the legal industry. Legal funding gives Claimants the financial resources to put their physical and mental health first. Legal funding also gives the legal teams supporting Claimants the ability and time to be able to put their best case forward. Legal funders level the playing field, in what would ordinarily be a David v Goliath scenario. The increase in court fees, cuts to legal aid and the changes to cost rules have meant that it is increasingly difficult for many people to access justice. Whilst legal funding might not be the correct solution for every case, for suitable cases it can make a hugely positive difference to the Claimant. The following case study illustrates just how crucial legal funding can be to achieve the best possible outcome.

The Legal Process The accident was life changing and whilst initially, the Defendant’s insurers were happy to fund C’s rehabilitation, this soon stopped and all requests for further interim payments were refused. It would be months before an interim payment application would be heard before a High Court Master. C and his family were at breaking point and his solicitors were genuinely concerned that C and his wife would separate, leaving C in the utmost desperate position.

Financial Support It was recommended that C’s solicitors’ approach Affiniti Finance to fund C’s care. Affiniti Finance agreed a Life and Rehabilitation loan of £60,000 to assist with the family’s financial burden and help C undergo the rehabilitation programme that he urgently required. Once put on notice of the loan, the Defendant’s insurer finally afforded a further interim of £25,000. In May 2017, the interim funds were running low and the Defendant insurer again refused any further interim payments. Affiniti Finance were approached again and agreed a Life and Rehabilitation loan of £85,000 over two separate loans, enabling

Legal funding C to take full control over his ongoing gives Claimants treatment regime and employ a support worker. This gave C’s family the quality of the financial life they were so desperately missing. resources to put their physical and Taking back Control mental health first. Legal finance meant that C’s options were

What happened? In late 2015, the Claimant [C] was involved in a high-speed road traffic accident when the Defendant’s [D] coach struck C’s vehicle head-on, shunting C’s vehicle backwards by 40-50 feet into a collision with a tree. Despite the Defendant driver being convicted of driving without due care and attention, the Defendant’s insurers did not admit liability until August 2016. As a result of the accident, C was left near death having sustained, amongst other things, a severe traumatic brain injury and several peripheral injuries, including vertebral column fractures, contusions to both lungs, a ruptured spleen and a lacerated liver. C was a manual worker, with a wife and 4 children.

no longer in the hands of the Defendant’s insurers and allowed his solicitors to instruct the appropriate medico-legal and care experts in readiness for the interim payment application, which was ultimately heard mid-2018, where the Defendant was ordered to pay a further £130,000. The C’s comprehensive care regime continued, with the Claimant and advisors firmly in control. The Defendant’s insurers subsequently satisfied all of C’s legal funding capital, interest and fees. The claim settled in excess of £4 million. Legal Funding can positively impact a Claimant’s case, recovery and general livelihood, and that should not be underestimated. They are a crucial part of the Claimant’s support team. Sarah Corrigan Business Development Manager at Affiniti Finance 35-41 Folgate Street, Spitalfields, London E1 6BX 0800 0306694 enquiries@affinitifinance.co.uk W W W. K A I N - K N I G H T. C O . U K


10 |

KAIN KNIGHT INBRIEF

CPR 36.17(4): what is sauce for the claimant goose is not sauce for the defendant gander

P

by Colin Campbell Retired Costs Judge, Consultant at Kain Knight

aying defendants constantly carp at the cost of litigation and at how much they are expected to pay when they lose. After all, if that were not the case and they paid up without a murmur, there would be no such thing as detailed assessment. Whilst the focus of their disquiet is usually directed at hourly expense rates and at lawyers taking too long to do the work, more recently the operation of Part 36 in its latest incarnation is becoming the focus for their indignation. Suppose a claimant makes an effective offer under CPR 36.5 and, subsequently, judgment is obtained against the defendant which is at least as advantageous as the proposals contained in the offer: unless it considers it unjust (emphasis added) to do so under CPR 36.17(3), the court must order that the claimant be entitled under CPR 36.17(4) to: - Interest on any money recovered not exceeding 10% over base rate. - Costs on the indemnity basis from the last date upon which the offer could have been accepted (known as “the relevant date”). - Interest on those costs not exceeding 10% over base rate. - An “additional amount” of 10% of the first £500,000 awarded and 5% on any amount above that figure, capped at £75,000. In considering whether it would be unjust so to order, CPR 36.17(5)(a) to (e) lists five factors which must be taken into account. These include the terms of the offer, the stage it was made, the information available to the parties at that time, conduct and whether the offer was a genuine attempt to settle the proceedings. Absent anything unjust, it follows that a goodly treasure trove of benefits is available to successful claimants who beat their own Part 36 offers. Less well known, but in some circumstances even more important, are the favourable “knock on” effects of the rule. First, an award of costs on the indemnity basis means freedom from the last approved or agreed budget, so a claimant, whose budgeted costs have been restricted to applicable court fees under CPR 3.14 for late filing of their costs budget, is no

longer so limited and those costs will be restored (subject to assessment). Not only that, when it comes to the assessment, the proportionality test under CPR 44.3(5) will not apply, so there is no aggregation of the incurred and budgeted costs to worry about. What you get following the line-by-line assessment is what you keep, as the proportionality rule only applies to standard basis costs. Now suppose that the costs boot is on the other foot and that it is the defendant who makes a Part 36 offer, which this time the claimant fails to beat. Sit back and enjoy an indemnity basis costs order plus enhanced interest on your costs? Not a bit of it. CPR 36.17(4) applies only to the claimant. The defendant has no entitlement to any of the benefits conferred by the rule and must apply for an indemnity basis costs order, otherwise standard basis costs will apply. Obtaining an indemnity basis order is easier said than done: see Shalaby v London North West Health Care NHS Trust, in which the trust failed to obtain an indemnity costs order because it could not establish that the claimant’s conduct had been “out of the norm”. There is, however, one curiosity. If it is the defendant who has failed to file a costs budget on time and the claimant subsequently does not beat the defendant’s Part 36 offer, the recoverable costs are restored as to 50% of what would have been payable but for the breach of CPR 3.14: see CPR 36.23(2) (a) and Ali v Channel 5 Broadcast Limited. That all said and done, and in the knowledge that the CPR 36.17(4) land of milk and honey is closed to defendants, what a canny paying party should then ask where the rule applies, is whether all the benefits are payable, or just some of them. After all, the 10% additional sum can be an unexpected windfall for the claimant. Whether it is fair that a receiving party who beats their own offer by a whisker, or whose costs are assessed down heavily, should automatically be entitled to as much as an extra £75,000, is surely something that the court should consider using the “unjust” test under the rule. That is the question which Stewart J was asked to decide in JLE (A Child by her Mother and Litigation Friend ELH) v Warrington & Halton Hospitals NHS Foundation Trust. Before looking at the case in detail, it is worth remembering why CPR 36.17(4) came into being in the first place.


| 11

A concise explanation is to be found in Slade J’s judgment in Cashman v Mid Essex Hospital Services NHS Trust, at paragraphs 23 and 25: “… the purpose of CPR 36.14(4)(d) is penal… 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 [see The Review of Civil Litigation Costs] 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.” It is clear, therefore, that the additional sum is to be awarded not as compensation, but as a penalty. A defendant who rejects a Part 36 offer made by a claimant who recovers more at trial, is to be penalised for their poor judgment in having brought the claimant to court and in having wasted valuable court resources. It is against this background that JLE is to be viewed. The facts were that in proceedings for clinical negligence, the claimant recovered £2.5 million in damages and served a bill for £617,751. An offer to settle the costs was then made by the claimant under CPR 36.5 for £425,000 inclusive of interest. The costs were allowed at £421,089, but the addition of £10,723 interest brought the total payable by the defendant up to £431,813. The claimant had therefore “won”, thereby triggering CPR 36.17(4) which included the 10% additional sum of £42,108.90 under sub-rule (d). As will have been observed, CPR 36.17(4) comes not with one, but with four separate benefits under sub-rules (a), (b), (c) and (d). Hitherto it has been something of an open question whether it is a case of “win and get all” or of “win and not necessarily get all”, in the sense that the court has discretion to disallow one or more of the benefits if it is just to do so. Put differently, is it permissible, and if so, what are the circumstances in which it might be appropriate to award, say, enhanced interest but not indemnity costs or the additional sum? That was the situation in JLE. Crying “foul”, the paying trust’s argument went like this. The claimant had failed to recover more than the offer and had only “won” because interest had been added. To reflect that, the court should sever the additional sum from the (a), (b) and (c) benefits and allow it at nil on the grounds that it would be unjust to do otherwise. That submission was accepted below by the master who had assessed the bill. Done out of her £42,108.90, the claimant appealed to Stewart J. The issue was whether there was a single test of “unjustness” so that it would not be applied separately to each of (a), (b), (c) and (d): the judge’s view was that there was nothing in the rule to suggest that it should be applied either way, separately or collectively. What the court was to do was to take all circumstances into account, including the factors (a) to (e) in CPR 36.17(5) and that, as the rule on its construction did not state that the injustice exception was to be applied across the board, it was open to the court to find it unjust to award all the benefits and to disallow one or more of them.

The issue then arose, if, as the judge had found, the additional sum could be severed from the rest, should the fact that there had been a “near-miss” mean that it was unjust to award the additional sum? Putting that more colloquially, should the small margin by which the offer had been beaten relative to the size of the bill sound in the disallowance of the additional sum which otherwise would be payable? Stewart J held that it should not. There was to be no going back to the days of Carver v BAA Plc, a case criticised in the Jackson Report and reversed by the Civil Procedure Rule Committee, when the beating of an offer by a small margin had opened the floodgates to arguments that there should be no automatic entitlement on the receiving party’s part to their costs. For that reason, it was not open to judges to take into account, in the exercise of their discretion, the amount by which a Part 36 offer had been beaten. That left the effect of the significant reduction to the bill. Brought in at £615,000 and allowed at £420,000, thereby involving a judicial chop of almost £200,000, it was common ground that such a heavy reduction could be a valid reason for refusing to make the additional award. However, the burden of showing injustice lay upon the party who had failed to beat the offer. That was a formidable obstacle. Below, the judge had held that the sum had been a disproportionate bonus. It had not: on the contrary, the additional sum was not a bonus but a penalty, and the judge had erred to the extent that she had been influenced by the reduction in the size of the bill. The claimant was entitled to the extra £42,108.90 and the trust would have to cough up. In reaching this conclusion, Stewart J followed Slade J’s decision in Cashman that it was not open to the court to decline to award the additional sum, not because the making of it would be unjust, but because it was unjust in the required amount, namely 10% of the assessed costs. He continued, obiter, that the court could not award a figure below 10%. It was all or nothing. Accordingly, since the master had gone wrong in principle, the trust was on the hook for the full panoply of the CPR 36.17(4) benefits. Rough justice for defendants? Arguably yes, for two reasons. First, if a claimant rejects a Part 36 offer which should have been accepted, the defendant will be kept in the action at its own expense and valuable court resources will have been used up when they need not have been. On the “what’s sauce for the goose should be sauce for the gander” argument, there is no compelling reason why an unreasonable claimant should be in a different position to an unreasonable defendant. The indemnity basis costs order should cut both ways. Second, although it is agreed that disallowances on assessment are a factor to take into account in deciding whether to award the additional sum, just how much does a defendant have to reduce the bill by in order to win that point? In Cashman, the claimant lost 34% and still got her additional sum; in JLE, it was 31% and likewise. A formidable obstacle indeed for defendants to overcome. Colin Campbell colin.campbell@kain-knight.co.uk

W W W. K A I N - K N I G H T. C O . U K


HEAD OFFICE:

LONDON:

CANTERBURY:

ST AUSTELL:

MANCHESTER:

Bentfield Place Bentfield Road Stansted, Essex

Summit House 12 Red Lion Square London WC1R 4QH

Regis House 9 Dane John Works Gordon Road Canterbury Kent, CT1 3PP

19 Duke Street St Austell Cornwall PL25 5PQ

53 Fountain Street Manchester M2 2AN

Tel: 0203 998 2687

Tel: 01227 786499 DX: 5310 Canterbury

Tel: 01726 64729 DX: 81254 St Austell

Tel: 0161 235 6410 DX: 303431 Manchester

CM24 8HL Tel: 01279 755552 DX: 50405 Bishop's Stortford

www.kain-knight.co.uk

W W W. K A I N - K N I G H T. C O . U K Disclaimer

Consistent with our policy when giving comment and advice on non-specific issues, Kain Knight cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems it is recommended that professional advice be sought from your normal contact.

Profile for YUMYUM

Kain Knight newsletter JAN 2020  

Latest issue of Main Knight's Legal Costs newsletter

Kain Knight newsletter JAN 2020  

Latest issue of Main Knight's Legal Costs newsletter

Profile for yumyum_