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Costs and Litigation Funding Newsletter June 2017

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Fixed Costs - where are we?

LJ Jackson remains on track to produce his report by 31 July 2017.

The current political landscape may create some delay as to any implementation. We have a new Lord Chancellor, the potential for a further General Election before the end of the year and something called ‘Brexit’ to focus on. It is therefore likely that LJ Jackson’s report will not sit as a priority on the new Lord Chancellor’s list of things to do, but time will only tell whether that is true.

Jeremy Hunt has been re-appointed as the Secretary of State for Health. He is clearly influential in relation to the proposed extension of fixed costs in clinical negligence cases. The fixed costs consultation for clinical negligence cases closed on 2 May 2017 and we await the response from the government.

Leading expert, Dominic Regan, recently spoke at the Association of Costs Lawyers Conference in Manchester. He said that fixed costs for claims up to £250,000 (all areas of litigation) was now highly unlikely. In clinical negligence, fixed costs for claims up to £25,000 is predicted by many experts, which is substantially less than the £250,000 proposed.

We will keep you posted with developments.

Any questions? Please contact me at andrew.mcaulay@clarionsolicitors.com or call me on 0113 336 3334.

The importance of the precedent H Costs Budget! Harrison on appeal.

Jacqueline Dawn Harrison v University Hospitals Coventry & Warwickshire NHS Trust [2017] WECA Civ 792 - the Court of Appeal has found that the budgeted costs will not be departed from in the absence of a “good reason”. Davies LJ further found that incurred costs do not form part of the budgeted costs and the good reason test does not apply to those incurred costs. Davies LJ confirmed that the proportionality test can be applied to the final claim for costs. This is despite the proportionality test having been applied when the costs budget was approved, this may result in claims for costs being subject to detailed assessment on the issue of proportionality alone.

Davies LJ recognised that practical problems remained surrounding incurred costs and advised that the CPR committee’s intention was to amend the rules to decouple incurred costs from budgeted costs. For a more in-depth analysis, please click here.

It is essential that an accurate budget is presented to the court, this Court of Appeal decision has ruled that a budget cannot be departed from unless there is a good reason to do so, this is a difficult test to overcome. There is no second bite of the cherry.

Sue Fox is a Senior Associate and the Head of Costs Budgeting in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact Sue at sue.fox@clarionsolicitors.com and 0113 336 3389, or the Clarion Costs Team on 0113 246 0622.

Issue Based Costs Orders

Issue based costs orders (‘IBCOs’) will generally arise in one of two circumstances; (1) a party succeeds on some issues but loses (or abandons) others at the final hearing; or (2) a part of the claim is determined and another continues, for example there is an interlocutory hearing which results in summary judgment on some elements of the claim where the remainder continue. It is important to stress that, as a general rule, assessment of costs where there is an IBCO is highly complex. Almost inevitably the costs of assessment are increased as a result and it may also act as a bar to settlement as the parties struggle to find common ground or get to grips with the assessment. As such, parties should in general seek to avoid IBCOs, although there may be circumstances where such an order is in a party’s interest or is unavoidable, and instead might consider whether a percentage based order would be more appropriate.

Once an IBCO has been made, the first point to consider is what costs will be included within the bill. See Dyson Technology Ltd v Strutt [2007] EWHC 1756 (Ch) and Medway Oil and Storage Company Ltd v Continental Contractors Ltd [1929] AC 88. In summary, costs can be split into four categories: (1) costs relating exclusively to the ‘successful’ element of the claim; (2) Costs relating exclusively to other (unsuccessful or ongoing) elements of the claim; (3) ‘common’ costs, which would have been incurred whatever claim was brought; and (4) costs which relate to more than one issue. Items falling into (1) may be recovered in full, (2) may not be recovered, (3) may in principle be recovered in full but should be reduced to reflect any additional work done as a result of the ‘other’ claims, and (4) must be divided out of the bill.

The second question is  the quantum of the division of items in categories (3) and (4). This question is likely to form a significant part of the argument on assessment, whether during settlement negotiations or before the court. Where a part of the claim is ongoing is it highly important that parties remember to record the extent of any division of items falling into categories (3) and (4), or ask the court to record such division on an item-by-item basis when it assesses the bill. This is because costs which are divided, as opposed to being disallowed, will fall to be assessed once the outstanding issues are concluded. For example, drafting Particulars of Claim (a category 3 and 4 cost) might be claimed at 1 hour. The court might find that 12 minutes related to ongoing issues, and of the remaining 48 minutes, 12 minutes were unreasonably incurred. Accordingly the court would allow 36 minutes for the Particulars of Claim but the 12 minutes divided out for the ongoing issues would be recoverable in principle if the claimant were to subsequently succeed on those issues. Furthermore it should be noted that the Particulars of Claim are themselves difficult to categorise as a part of the document will relate specifically to successful issues, a part to other issues (i.e. category 4) whereas some of the document will be general background information which would have been included regardless of the issues (category 3).

This brief introduction gives some indication of the complexity of dealing with IBCOs, and why they should ordinarily be avoided if at all possible. If, however, you do receive such an order it is important to plan from the outset how you intend to approach the division of costs, and in some circumstances it may be beneficial to try to agree a common approach with your opponent before you draft the bill.

Any questions? Please contact Matthew Rose at matthew.rose@clarionsolicitors.com or call  on 0113 336 3348.

Disclaimer: Anything posted on this blog is for general information only and is not intended to provide legal advice on any general or specific matter. Please refer to our terms and conditions for further information. Please contact the author of the blog if you would like to discuss the issues raised.