Thank you to everyone who attended our seminar on 16th May. The feedback has been very positive and we were kindly provided with ideas for new topics for our next seminar. Our next seminar is provisionally booked for 17th October 2019 - please save the date. Further details will be announced in due course.
In this newsletter, we have some interesting articles by Sue Fox and Kris Kilsby on costs budget revisions and exceptional circumstances. As always, please feel free to contact any of the Costs and Litigation Funding Team with any questions or queries that you may have.
In addition, we are always talking about key legal costs developments and what we are up to on our twitter account (@ClarionCosts), please follow us if you want to be kept up to date between our monthly newsletters.
Must a budget be revised?
Following on from our successful seminar last week, the obligation to revise a budget was a particularly hot topic. Is applying to revise optional in the event that there has been a significant development in the litigation? – No.
Why not simply rely on good reasons to depart from the budget at the conclusion of the claim and avoid the time and expense associated with revising the budget?
Because the rules state that you have to revise the budget if there has been a significant development in the litigation.
CPR 3 PD 7.6a, “Each party shall revise its budget in respect of future costs upwards or downwards, if significant developments in the litigation warrant such revisions”.
This was confirmed at paragraph 66 of Sharp -v- Blank & Ors  EWHC 3390 (CH) (21 December 2017) when Chief Master Marsh stated that “The revision of budgets under paragraph 7.6 is not optional. It is a requirement placed on the parties. This makes sense because once a costs management order has been made, the court is under a duty to manage the costs to be incurred”.
The biggest question that remains is, what is “significant”? This is subjective and can lead to inconsistency, Chief Master March does provide some guidance and there has been a scattering of case law in that regard.
‘Exceptional Circumstances’ is a high bar to reach
If a matter is submitted through the RTA or EL/PL portal, but subsequently falls out of the portal then the costs of the matter are dealt with under the Fixed Recoverable Costs (FRC) regime under CPR 45 Section IIIA. This could be because of a re-valuation of the claim above the £25,000 portal limit or because the Defendant denies liability or fails to respond within the correct time frame.
The FRC regime will allow fixed costs as set out in CPR 45.29C and disbursements in accordance with CPR 45.29I (for matter commenced under the RTA portal).
However, CPR 45.29J allows the court to either summarily assess the costs or make an order for the costs to be subject to detailed assessment IF it considers that there are exceptional circumstances making it appropriate to do so.
The meaning of ‘exceptional circumstances’ was considered in the recent case of Ferri v Gill  EWHC 952 (QB).
The matter involved a Claimant who suffered a serious shoulder injury after he was knocked off his bike by the Defendant’s opening car door. The matter was initially conducted by Leigh Day on behalf of the Claimant who proceeded to submit the matter to the RTA Portal. Liability was admitted and an offer of £1,500.00 was made. The Claimant then instructed new solicitors, Fieldfisher, who considered that the matter was not suitable for the RTA portal in light of the Claimant’s serious injuries and the increasing loss of earnings claim. The matter eventually settled in the sum of £42,000.00 prior to the issuing of proceedings.
As the claim had been started in the Portal, the claim was subject to the fixed FRC regime even though the value had been increased to more than the Portal threshold amount of £25,000. You can find out more about how to avoid this trap here. As a result, the Claimant sought for costs to be subject to detailed assessment instead of under the FRC regime pursuant to CPR 45.29J. Master McCloud sitting as a Deputy Costs Judge made an order for costs to be subject to detailed assessment pursuant to CPR 45.29J. The Defendant appealed.
Mr Justice Stewart considered the grounds for appeal against the making of the order for costs to be subject to detailed assessment. He addressed the previous authority of Qadar v Esure Services Ltd  which held that when a matter is allocated to the Multi-Track it is no longer subject to the FRC regime. He also addressed the decision in Hislop v Perde  where the Court of Appeal refused to depart from the FRC regime when the Defendant accepts a Claimant’s Part 36 offer out of time and the obiter comments of Coulson LJ who stated that ‘It goes without saying that a test requiring “exceptional circumstances” is already a high one’.
In respect of the above Mr Justice Stewart allowed the Defendant’s appeal against the making of an order for costs to be subject to detailed assessment because the high bar of ‘exceptional circumstances’ had not been met.
It is clear that the bar to establish ‘exceptional circumstances’ to escape the FRC regime is a high one. Solicitors conducting personal injury work must carefully consider the issue of quantum as best as they can before submitting a matter through either the RTA or the EL/PL portal if they wish to avoid being restricted to FRC.
The only clear and certain escape route away from the FRC regime (where a case has been submitted through the portal) is to issue and have the case allocated to the Multi-Track. This can be achieved through a consent order, if of course the opposing party is willing to agree to the making of such an order.
Alternatively, if the value of the claim has increased significantly, but the claim has fallen out of the Portal it may well be sensible to first consider the application of the FRC regime. This is because the basis of costs awarded is on a percentage of the damages awarded and in some circumstances, this may be more than the costs incurred to date. The additional benefit in such a case is that the FRC regime is not subject to the test of proportionality and the costs would remain fixed.
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.