Be careful regarding interest on disbursement funding loans and advice given to Clients regarding recovery of the same.
Master Gordon Saker made it clear in Marbrow v Sharpes Garden Services Ltd[2020] EWHC B26 (Costs) (10 July 2020) that interest paid on a disbursement funding loan was not regarded recoverable as an item of cost or, that the rules were designed to let interest to run from an earlier period than Judgment and thus allowing the interest to be recovered that way. The case of Hunt v RM Douglas (Roofing) Ltd [1987] 11 WLUK 221 was cited by the Defendant where the Claimant attempted to recover on the taxation of his costs the interest that he had incurred under an overdraft to fund the disbursements required for his claim. The Court of Appeal held that funding costs had never been included in the categories of expense recoverable as costs and to include them would constitute an unwarranted extension. Master Gordon Saker said that it was clear from the case of Hunt v RM Douglas (Roofing) Ltd that interest incurred under a disbursement funding loan could not be recoverable as a category of expense and ultimately disallowed the item within the bill. Consideration was then given to CPR 44.2(6)(g), which gives the Court the power to order the payment of interest on costs from a date before Judgment. However, Master Gordon Saker decided that the inceptor rule remained the default position and no provision had been made in the Legal Aid, Sentencing and Punishment of Offenders Act 2013, to enable the recovery of funding costs or by creating a default entitlement to pre-judgment interest.
Clear wording and explanation regarding charges with Clients, scope of work and costs estimates are an absolute must!
Don’t rely on vague conversations of which there are no contemporaneous notes of. CPR 46.9 (2) to (4) couldn’t be clearer:
“Section 74(3) of the Solicitors Act 1974 applies unless the solicitor and client have entered into a written agreement which expressly permits payment to the solicitor of an amount of costs greater than that which the client could have recovered from another party to the proceedings.
Make sure the clock is ticking
If you are not making offers by way of Part 36 for costs then make sure that Calderbank offers are time limited or else you risk ending up in a pickle. In the case of MEF v St George’s Healthcare NHS Trustthe Court considered whether a Calderbank offer to settle, without an express time limit, could be accepted once the relevant substantive hearing had begun. In this particular case, the Defendant had put forward an offer to settle the Claimant’s claim for costs at £440,000 around a month before the matter was due to be heard at a 3 day Detailed Assessment Hearing. However, following the Judge making a number of rulings in the Detailed Assessment in favour of the Defendant, and it becoming clear the Claimant would not beat the offer previously put forward by the Defendant, the Claimant’s Solicitors sent an email to the Defendant purporting to accept the offer of £440,000.00. The Court concluded that offer remained open for acceptance during the hearing given there was no time limit on the offer, the offer had not been withdrawn and the Claimant’s email had given rise to a contractually binding settlement of the Detailed Assessment proceedings.
Specifically, the Court said ‘At the time that the offer is made and then at the door of the Court, there remain incentives, respectively, to make and retain the offer, even if it is capable of acceptance in the course of the Hearing. It was always open to the Defendant to put a time limit on the offer. Equally it was open to it to withdraw the offer at any time.
Don’t let lockdown be an excuse for failing to comply with Court deadlines
Master Leonard made it clear in the case of Masten v London Britannia Hotel Ltdthat Covid 19 and lockdown was not a good reason for non-compliance of Court deadlines. Master Leonard said there had been a negligent failure to serve Points of Dispute by the Paying Party and that the failure could not be offset by the effects of the circumstances of those working on the case. Following a Personal Injury claim a Bill of Costs was served by the Claimant and Points of Dispute were agreed to be due on or by 28th February 2020. However, this date passed and no Points of Dispute were received by the Claimant. A request for a Default Costs Certificate was made and received by the middle of June 2020. Subsequently, the Defendant made an Application to set aside the Default Costs Certificate. The Application acknowledged that the failure was significant and serious but that relief should have been granted in the circumstances as the failure arose around the time that homeworking and family commitments changed. Master Leonard said the Claimant was being asked to relinquish the Default Costs Certificate and to accept a four-month delay to serve Points of Dispute. He said ‘There are cases in which the application of the overriding objective and the balance of fairness require that the consequences of negligence must be borne by the negligent party. This is one of them.’ As such the Application to set aside the Default Costs Certificate was refused.
Don’t let a lack of time at Summary Assessment compromise your costs
In the case of Cohen v Fine & Ors [2020] EWHC 3278 (Ch) we were given an insight into the procedural aspects of summary assessment including how these should be conducted by the Court. The receiving party in this case appealed against the original decision awarding £27,000 on summary assessment. As a result, a “line by line” assessment of the receiving party’s costs resulted in an award of £35,703.00 which was allowed by HHJ Hodge QC who presided over the appeal.
Guidance was provided on how future costs assessments could be conducted in cases where summary assessment was applicable. The first thing that the Court should establish from the paying party is how many, and which, individual elements of the statement of costs are subject to challenge. If there is simply no time available to undertake an item by item consideration of those elements, the Court should make this clear; and it should ask whether all relevant parties expressly consent to the Court adopting a broad brush, and global, approach to these disputed items, without minutely examining them in any detail. If such consent is forthcoming from all relevant parties, it should be expressly recorded in the Court’s order. If no such consent is forthcoming from all relevant parties, then the Court has the options of: (1) ordering that the assessment (and, if not previously determined, the incidence and/or the basis) of the costs of the relevant hearing will be determined on paper following upon an exchange of short, sequential written submissions from the relevant parties (as O’Farrell J did in Ohpen Operations); (2) re-listing the matter for a summary assessment of the costs; or (3) directing that the receiving party’s costs should be the subject of a detailed assessment. If a detailed assessment is ordered, the Court should exercise its power under CPR 44.2 (8) to order the paying party to pay a reasonable sum on account of costs unless there is good reason not to do so. As such this salutary power should always be borne firmly in mind as an alternative to a rushed, and procedurally improper, summary assessment.
Revising your budget
If the pandemic has impacted your case, consider whether you need to revise your budget. A simple stay is unlikely to qualify as a “significant development” however, if your case has been substantially impacted it’s likely you will meet the threshold.
Time is of the essence
If you do need to revise a budget be sure to sort it “promptly”. A common trend we have seen from 2020 is refusal to revise budgets due to unnecessary delay.
Oppressive Behaviour. Be aware of your funds
Make use of the new provision PD 3E para 13 regarding Oppressive Behaviour. Careful consideration should be given as to when PD 3E para 13 should be deployed given the potential sanction of striking out a party’s claim/Defence if an abuse of process is proved.
Remember your obligations in accordance with SRA Rules
Remember your obligations under the SRA Code of Conduct to keep clients updated with regard to costs.
2.03 Information about the cost (1) You must give your client the best information possible about the likely overall cost of a matter both at the outset and, when appropriate, as the matter progresses.
Watch your words