2017 – A Year in Costs
January – Stephen Innes, Thakkar v Patel  EWCA Civ 117
The trial judge’s costs order (that the Defendant pay 75% of the Claimant’s costs) reflected his finding that the Defendant had acted unreasonably: after both sides had agreed to mediate, the Defendant’s inaction caused mediation to be abandoned.
The Court of Appeal upheld the decision. Jackson LJ said:
“in a case where…mediation is obviously appropriate, it behoves both parties to get on with it. If one party frustrates the process by delaying and dragging its feet for no good reason, that will merit a costs sanction.”
February – Stephen Innes, Merrix v Heart of England NHS EWHC 346 (QB)
Carr J determined that in a standard basis assessment the court would not depart from the receiving party’s last approved or agreed budget unless a good reason was shown, whether the receiving party claimed less, the same as, or more than the sums budgeted.
If the receiving party had spent less than was approved in the budget, the indemnity principle would require departure from the budget.
March – Stephen Innes, In the matter of RBS (Rights Issue Litigation) EWHC 1217 (Ch)
Hildyard J ordered a commercial funder who might ultimately be subject to a non-party costs order to give security for costs under CPR 25.14.
It was relevant to consider (a) whether the non-party was motivated by a commercial interest in the litigation, (b) whether there was a real risk of non-payment, (c) whether (less relevantly with commercial funders) a risk of liability for costs had been sufficiently communicated to the non-party, and (d) whether there were factors, such as a delay, to tip the overall balance against making an order.
Importantly, the applicants were ordered to give a cross undertaking.
April – Pippa Manby, Peter Mills Dammermann v Lanyon Bowdler LLP EWCA Civ 269
The Court of Appeal clarified that, for the purposes of deciding whether an appellant had behaved unreasonably within CPR 27.14(2)(g) in pursuing an appeal in a small claims track matter, the test was to enquire whether his conduct permitted of a reasonable explanation. If so, the course adopted might be regarded as optimistic and as reflecting on the appellant’s judgment or that of his legal advisers, but it would not be unreasonable.
Whilst judges should apply the dictum in Ridehalgh v Horsefield  Ch 205 on unreasonableness as guidance when determining unreasonableness under CPR 27.14(2)(g), they should not import the entire wasted costs jurisprudence.
May – Pippa Manby, Asghar v Bhatti EWHC 1702 (QB)
At the CMC the claimant failed to file a budget and his budget was restricted to court fees. The parties later agreed that the trial would last 12rather than six days. The claimant obtained the master’s permission to rely on a budget comprising those additional six days’ worth of costs on the basis that there had been a significant development in the litigation and it was appropriate to review the budget.
Lewis J upheld the master’s decision and rejected the defendants’ contention that this would undermine the policy underlying under CPR 3.14.
June – Pippa Manby, Harrison v University Hospitals Coventry & Warwickshire NHS Trust EWCA Civ 792
The Court of Appeal approved the decision of Carr J in Merrix (see February) that where there is a proposed departure from a budgeted figure for costs (whether upwards or downwards) the court will only allow such departure if there is a good reason for so doing.
Costs already incurred at the date of the costs management order would be the subject of detailed assessment in the ordinary way without any requirement of good reason. They had not been agreed or approved. Courts at costs budgeting hearings were focussed on future costs and did not have jurisdiction to approve incurred costs.
July – Ben Smiley, Howe v Motor Insurers’ Bureau EWCA Civ 932
The Court of Appeal considered what constitutes a claim for damages for personal injury and so gives rise to QOCS.
The claimant had been injured in an RTA in France. Unable to trace the other vehicle or its driver, he brought a claim for compensation against the Motor Insurers’ Bureau under Regulations giving effect to EU Directive 2000/26/EC. The claim was dismissed and the appeal was struck out.
Having regard to the rationale underlying QOCS, the Court of Appeal interpreted the word “damages” in CPR r.44.13 as including compensation recoverable by statute, so that QOCS applied.
August – Ben Smiley, Mott v Long and Long EWHC 2130 (TCC)
The High Court granted an application for relief from sanction in respect of a costs budget which had been served ten days late.
The Court held that the breach was serious or significant, and it was not satisfied that there was good reason for the default (due to insufficient evidence of “IT difficulties”). Relief was granted, however,largely because revised budgets were required in any event.
The fact-sensitive nature of such applications is demonstrated by contrasting the earlier decision of Lakhani v MahmudEWHC 1713 (Ch), when relief was refused despite a budget being served only a day late.
September – Ben Smiley, Montpelier BusinessReorganisation LtdvArmitage Jones LLP and Others EWHC 2273 (QB)
The High Court analysed applications for non-party costs orders against companies (“MPL” and “MP Leeds”) which had assisted in funding the claimant’s unsuccessful claim. MPL was 50% shareholder in the claimant. MP Leeds was a subsidiary of MPL.
The application against MPL was granted as: it was the “real party”, it was the predominant funder, and the “special rules” regarding directors funding claims did not apply to shareholders.
The application against MP Leeds was refused as it was not a “real party”, it had not funded the litigation to a sufficient extent, and it did not exert control.
October – Shail Patel, Slade v Boodia EWHC 2699 QB
The High Court surprised the solicitors’ profession by ruling that an interim statute bill which does not include disbursements for the period it coverscontravenes the requirement that an interim statute bill be final in respect of that period, and is not therefore an interim statute bill at all.
The decision was arguably inconsistent with a well established practice to bill disbursements separately. Solicitors who want to ensure they are issuing interim statute bills (with time for assessment running against the client) will have to include all disbursements for that period, pending an appeal (which is underway).
November – Shail Patel, Premier Motorauctions v Lloyds and PwC EWCA Civ 1872
The Court of Appeal reviewed the principles applicable to security for costs applications in cases where ATE insurance has been obtained by the claimant.
The Court must assess whether the ATE policy provides “sufficient protection” such that there is no reason to believe the claimant would be unable to pay the costs when due. That opens the gateway under CPR 25.13(2)(c), and security is likely to be ordered absent a good argument on “stifling”.
Deeds of indemnity and anti-avoidance clauses are likely to become prevalent given the low threshold of “no reason to believe”.
December – Shail Patel, Budana v Leeds Teaching Hospital NHS Trust EWCA Civ 1980
The Court of Appeal finally brought clarity to the vexed problem of post-01.04.13 assignments of CFAs.
While (by a majority) such an “assignment” was in reality likely (or possibly, certain) to be a novation, it matters not. The transitional provision in s44(6) of LASPO (“a [CFA] entered into before [01.04.13]”) applied not just to a CFA actually entered pre-LASPO but to a clone, by novation, of such a CFA. That construction of s.44(6) was necessary to give effect to Parliament’s intention, and prevent a claimant falling between the two regimes.