Peering into the past and gazing into the future - a costs review (Part 1)

Posted by Michelle Barron on 9th January, 2023 in Opinion and categorised in .

Costs: Reviewing 2022 and the year ahead

Hourly Rates

Since the long awaited update of the 2010 Guideline Hourly Rates, which were introduced in October 2021, issues of retrospectivity have naturally been a talking point and gained judicial attention..

In R-v-BARTS NHS TRUST (2022) EWHC B3 (Costs) Master Rowley stated “Where the work is as recent as 2019, it seems to me there is no argument that the correct starting point is the 2021 guideline figures” More than this, he was persuaded the exceed the guidelines for all grades of fee earner, on the grounds of importance, complexity and urgency, factors which are covered within CPR 44.4(3). This decision makes sense, since the data upon which these updated guidelines are based, goes back to 2019-2020.

In TRX-v-SOUTHAMPTON FC (2022) EWHC B7 Master Brown, armed with the proposed new Guideline Rates before they came into effect, applied the 2021 Guideline Rates to work undertaken as far back as 2017. He stated:

“I do think some enhancement is appropriate even on the proposed rates that are set out in the new GHR, CJC consultation documents. I think some uplift is appropriate having regard to the nature of the case. I do not think that there is any warrant for straightforward inflationary increases from the 2010 Guideline rates, not least given the more recent proposals…”

Given that the Guideline Rates were always updated every two years, the absence of an update for almost 11 years must carry weight to some increase further back than this?

And the Master of the Rolls has indicated that there will be a review of the Guideline Hourly Rates in two-years’ time! Will this be a return to the pre-2010 normality?

Although paragraph 28 of the 2021 Guidance to the summary Assessment of Costs states that the figures “may also be a helpful starting point on detailed assessment”, in SAMSUNG-v-LG (2022) EWCA Civ 466 Males LJ was sympathetic to the arguments raised on behalf of LG, that the hourly rates in competition litigation are alway high and held that there was no justification in exceeding the guideline rates in the absence of “a clear and compelling justification”. Despite this being a decision of the Court of Appeal, most cost assessment hearings will treat the guidelines as starting point, depending on the applicable factors under CPR 44.4(3) as did Master Rowley in R-v-Barts above.


Part 36

OMYA UK LIMITED-v-ANDREWS EXCAVATIONS LIMITED (2022) EWHC 1882 (TCC) saw the court accept a very high Part 36 offer as being genuine.  The offer was to accept 98.95% of the amount claimed. Roger Ter Haar KC sitting as a Deputy High Court Judge, took a dim view of the defence which he described as “wholly implausible” (paragraph 44). Reference was made to RAWBANK-v-TRAVELEX (2020) Costs LR 781 where a 99.7% offer was held as being a genuine effort to settle given that success was “a near certainty”. Let’s remember that The White Book 2022 at page 1307, declares “Of course there is nothing inherently wrong with very high claimant offers in extremely strong cases, but it may be prudent in such case for claimants to explain in their offer letters why such a small discount is being offered for settlement”.

On the issue of referring to a Part 36 offer at an interim application, Mrs Justice Collins Rice in FKJ-v-RVT (2022) EWHC 411 (QBD) refused permission, despite arguments that it was for the purposes of case and costs management.

Can a defendant use a Damages Based Agreement to fund their litigation? No is the unambiguous decision of in CANDEY-v-TONSTATE GROUP LIMITED (2022) EWCA Civ 936. Why? Because the defendant would be no better of at the end than they were at the start. Section 58AA (3) of LASPO requires the DBA to provide for payment if the client “obtains a specified financial benefit” from the proceedings. Males LJ said “heads I win, tails you lose” was not on. The Court did acknowledge that a DBA would operate not only where damages were recovered but also in the case of “a debt or other forms of financial recovery”.

The case of Zuberi has made DBA’s more attractive by resolving the issue of fee recovery in the event that the retainer with the client is terminated, but as yet, there seems no sign of any amendment of the 2013 Regulations, which were not fit for purpose!

The big case of the year was Belsner v Cam Legal Services Ltd [2020] EWHC 2755

(QB), which raised more questions than it answered! The case at first instance surrounded Section 74(3) of the Solicitors Act 1974, which  says the amount allowed on assessment cannot exceed what the court would have allowed as between party and party. However, CPR 46.9(2) says this can be overridden by written agreement. A solicitor seeking to rely on CPR 46.9(2) has to show there is 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.

Despite the action being a low value personal injury claim pursued through the MOJ Portal, it found its way to the Court of Appeal in February 2022. The Court of Appeal abandoned the hearing after the issue of whether work done under the pre-action protocol is contentious or non-contentious business. The court heard that there were 900 cases stayed awaiting the outcome of this test case. A new hearing was listed by 31 July, with a time estimate of two days and a third day available if needed.

The hearing was delayed but judgment was handed down swiftly in October 2022. The court held that costs of claims which settle at stage one or two of the MOJ portal are, as it stands, non-contentious costs.  As a result, s.74(3) did not apply to this claim (and as a consequence neither did r.46.9(2) or the Consumer Rights A2015).

They further held that a solicitor does not owe a fiduciary duty to a client when negotiating their fees but stated that:

“The duty to ensure that clients receive the best possible information about pricing and the likely overall cost of the case may have similarities to fiduciary duties of loyalty, but they are not such duties. They are professional duties, and the consequences of the breach of a professional duty, even one given effect by statute, are different from the consequences of breaches of fiduciary duties.” [80]

The Master of the Rolls’ view (with which the court agreed) the court found that:

●the distinction between continuous and non-contentious costs was illogical and was in urgent need of legislative attention;

●it was not logical that s.74(3) and r.46.9(2) should apply to cases issued in the county courts but not to portal claims;

●it was unsatisfactory that solicitors were signing their clients up to retainers which allowed them to charge greater than fixed costs and that a voluntary cap ex post facto did not alleviate this situation.

Having found the costs were non-contentious, the court re-assessed them afresh using the dual test of fairness and reasonableness (they had been assessed as contentious costs by the District Judge with no objection raised by the solicitors).

“The ultimate question on an assessment of non-contentious costs, taking into account the factors stated in the 2009 Order, is: what overall amount would it be fair and reasonable for the client to pay? As Morgan J said in Mastercigars v. Withers [2009] 1 WLR 881 at [102]: Even if the solicitor has spent a reasonable time on reasonable items of work and the charging rate is reasonable, the resulting figure may exceed what it is reasonable in all the circumstances to expect the client to pay and, to the extent that the figure does exceed what is reasonable to expect the client to pay, the excess is not recoverable.” [96]

In the circumstances of this case the Master of the Rolls found that profit costs of £500 were fair and reasonable as was the success fee amount claimed.  There was therefore no reduction to the costs.

Issues going forward?

●The convention about contentious and non-contentious costs should be updated, as should the Solicitors Act

●Stage one and two MOJ portal claims are now non-contentious which dramatically changes the approach to billing - gross sum bills are not allowed unless and until there is a change to The Solicitors' (Non-Contentious Business) Remuneration Order 1994

●Can a CFA be a non-contentious business agreement? The Law Society states it’s standard model CFA is NOT a contentious business agreement

●Advice to clients covering different stages in MOJ portal is now critical.