31.08.2011Godfrey Morgan Solicitors Ltd. v Cobalt Systems Ltd. (Practice and Procedure: Costs)  UKEAT 0608_10_3108
Key areas: Wasted Costs Order; Employment Appeal Tribunal
This was an appeal against a ruling that the Claimant’s Solicitors pay the Defendant’s wasted costs of £7,313.00, under r. 48(1) Employment Tribunal Rules of Procedure.
The Claimant’s Solicitors had acted under a contingency basis: they would take a percentage of the damages, which varied depending on how far the case progressed. If the case settled before an appeal was made to the Tribunal then 25% of the damages would be paid; 35% if it settled post-issue but pre-Hearing and 50% if it went to a Hearing.
The Claimant initially claimed unfair dismissal, unpaid holiday pay and sex discrimination; however, the claim for sex discrimination was later withdrawn.
After the case was listed for a two-day hearing, the Solicitors told the Claimant that he would need to pay for Counsel for the Hearing. The Claimant was surprised given the terms of the contingency agreement and said that he would be unable to pay, and so could not proceed with the claim.
The Solicitors did not, however, advise the Defendant that the case was withdrawn until 1 week before trial.
The Defendant then issued an Application for their costs against the Claimant or for wasted costs against the Solicitors.
The Claimant stated that he had advised the Solicitors that he could not afford to continue the case, but the Solicitors said that their instructions were to negotiate until the week before trial.
At first instance, the Judge held that the Claimant should not be liable for costs, given the contents of the contingency agreement, but the Solicitors should be.
At first instance, the Judge held that the Solicitors had not adequately explained how Counsel’s fees were to be paid, and so the Claimant was entitled to believe that they would not be paid until after the outcome of the Hearing.
The Solicitors appealed on three grounds.
Firstly, that they had not been allowed to rely on their file of papers. The Appeal noted that if it had been allowed it would have impacted the criticisms of the Solicitors. It was noted that the Solicitors had not complied with directions for disclosure, including of the file itself, which is why they were unable to rely on the file’s contents. On Appeal, this ruling was upheld.
The second ground was over allowing the Defendant to cross-examine the Solicitor. The Solicitors submitted that this went against existing Court of Appeal caselaw. However, this too was rejected, on the grounds that it was appropriate in the circumstances.
The final ground was that the Judge did not refer to any caselaw in support of his award of wasted costs. This was also rejected because the Judge relied on the fact that the Claimant had previously stated that he would be unable to take the case forward due to his lack of funds.
Overall, the Appeal was dismissed.
25.08.2011Javed v British Telecommunications PLC  EWHC 90212 (Costs)
Key areas: Part 45; RTA; SCCO
This was a hearing to determine whether or costs standard costs should apply or only those under CPR 45, section II.
The case settled after issue via the acceptance of a Part 36 offer for £1,500.00. A Consent Order was then agreed which stated that Standard Basis costs are to be paid.
Costs were claimed at £8,654.19 and the Defendant’s Points of Dispute stated that proceedings had been issued prematurely.
In the main action the Claimant disclosed medical evidence and made a Part 36 offer on the same day. The Defendant asked for details about the Claimant’s other accident and that report was also disclosed, albeit with pages missing. On the same day, the Claimant also sent the file to be issued in Court. The Defendant noted that both reports had pages missing, and the Claimant sent the missing pages from the second report not from the earlier accident. Proceedings were then issued. 6 weeks later the Claimant supplied the missing pages from the first report. Eight months later the Claimant supplies the medical notes and on the same day the Defendant made a Part 36 offer which was accepted.
The Defendant submitted that they were not in a position to consider quantum until they had the full medical evidence. As a result, it was unreasonable to issue proceedings until then.
The Claimant submitted that the later report covered the report from the first accident; causation was in any event in dispute and the Defendant didn’t seek a stay of the proceedings.
The Court held that it was unreasonable to issue proceedings and the Claimant was also in breach of the Pre-Action Protocol. The Court noted that proceedings had been prepared a month before the second report was served, even though limitation was not an issue.
The Court also noted that the Defendant repeatedly chased the Claimant for further information.
The Court then turned to whether only CPR 45, section II costs should be awarded.
The Defendant submitted that as the case was issued prematurely only CPR 45, section II costs should apply.
The Claimant submitted that as a Part 36 offer was accepted, there had to be a Detailed Assessment standard costs should be awarded.
The Court held that the Claimant was entitled to her reasonable costs. However, the Court stated that the costs were unreasonably incurred, and are also disproportionate.
As a result, the Claimant was only entitled to CPR 45, section II costs.
23.08.2011JN Dairies Ltd. v Johal Dairies Ltd.; Singh  EWHC 90211 (Costs)
Key areas: CFA; success fee; SCCO
This was a hearing to determine whether success fees could be claimed on pre-CFA costs, which were incurred under a standard retainer. The retainer was charged due to the Claimant being unable to pay for further work to be done.
The CFA stated that it covered “Any work we carry out or Expenses we incur both before and after the date of the Agreement in relation to the Claim”.
Counsel’s CFA stated that it covered
“The Base Rate for Counsel’s fees to which the Uplift for the Uplifted Rate is to be applied is as follows:
(a) as regards all work other than Court appearances, in accordance with his hourly rate applicable to the type of work involved in the Action, currently £650 plus VAT per hour;
(b) as regards refreshers, in accordance with his daily rate for the type of work involved in the Appeal, currently £5,000 plus VAT per day;
(c) subject to paragraph (e) below the Brief for the Appeal will be £80,000 plus VAT and be deemed delivered as of the 2nd of January 2010. This fee will include all work after the 2nd of January. All work prior to this date will be charged for, based on the hourly rate specified in subclause (a) above”
This was held to allow for a success fee on Counsel’s pre-CFA fees.
The Defendant submitted that the N251 did not apply to the pre-CFA costs in this case because it was prospective, not retrospective. It was also submitted that Counsel had a lower risk due to the terms of the CFA which guaranteed some sort of payment.
The Claimant submitted that the CFAs were entered into to enable the case to continue; and that there was no evidence that the Defendant would have acted differently had notice of retrospective success fees been given.
The Court held that between the parties it was not reasonable to pay a retrospective success fee, even if it could be reasonable between Solicitor and client, because the pre-CFA costs were incurred on a standard retainer.
Therefore, the success fees on the pre-CFA work done by both Solicitors and Counsel were disallowed.
23.08.2011Afolayan v MRCS Ltd. (Unfair Dismissal)  UKEAT 0406_10_2308
Key areas: refusal to deal with costs issues; Employment Appeal Tribunal
This was an appeal in a claim for unfair dismissal and racial discrimination.
The Claimant had won part of his claim, but with significant contributory negligence, and the Tribunal had refused to award costs. The Claimant applied for permission to appeal to the Court of Appeal over the refusal of costs, which was granted, but was subsequently dismissed.
In the meantime, the Claimant had appealed against the contributory negligence aspect, and had obtained a significant reduction. However, his Application for costs had been adjourned on the basis that the Tribunal considered it should be dealt with by the original Tribunal.
The Claimant issued an Application against this adjournment and it was directed that there should be a costs hearing.
The subsequent Tribunal refused to deal with costs stating that “It would be wholly inappropriate for us to give any ruling about the costs… since we have not been the Tribunal involved in any of those proceedings”.
At this Hearing, the EAT ruled that they had “sympathy” with the Judge and could see his reasons for refusing to deal with costs, but said he was wrong, and determined that there were 3 options: pass the matter back to the original Tribunal; pass the matter to a new Tribunal; pass the matter to the subsequent Tribunal.
The Tribunal held that passing the matter back to the subsequent Tribunal was the “least unsatisfactory course” even thought the Claimant considered that he would be prejudiced to the EAT overturning his decision.
19.08.2011Ramzan v Brookwide Ltd.  EWCA Civ 1033
Key areas: both parties win some issues; Court of Appeal
The main action was a claim for misappropriation of property owned by the Respondent. At first instance, the Respondent was awarded £588,517.43 for damages and interest.
The Appellant submitted that there had been double recovery and that the awards were excessive. The Court agreed.
Four issues were appealed: an award for loss of profit at £225,073.50, was reduced to £213,073.50; three awards were overturned completely: mesne profits awarded at £23,210.64; damages for breach of trust of £19,741.50; and damages for repairs to a fire escape which were awarded at £85,269.75; while an award for exemplary damages was reduced from £60,000.00 to £20,000.00. The Appellant lost an appeal against interest being awarded at 6%, but the actual amount to pay was reduced to the impact of the other awards. In total, the amount which the Appellant had to pay was reduced to £344,831.51, a reduction of over £243,000.00.
In relation to costs the Court held that the Appellant had obtained a “very substantial reduction in the amount awarded” at first instance.
As a result, it held that they were the winner overall, even though it had lost on one issue, and in the circumstances did not consider that the Appellant should suffer a reduction in their costs.
It noted that the Appellant had not satisfied the outstanding damages judgment, and so their costs should be off-set against the damages.
12.08.2011Ackerman v Ackerman & Ors  EWHC 2183 (Ch)
Key areas: security for costs; High Court
This was an Application for security of costs brought by the 1st, 2nd and 4th Defendants in a claim over a breach of trust.
The claim has been listed for trial and so the Court noted that the only real option was for security to trial.
The Application rested on CPR 25.13(2)(g), in that it was submitted that the Claimant had attempted to make it difficult to enforce a costs order against him.
The Claimant accepted that it applied because he had transferred his half-share in his house to his wife and because he had transferred funds to a law firm in Gibraltar in order to pay his legal costs in this action and in a separate set of proceedings. As a result, those funds no longer existed.
The house had been valued at £750,000.00 so the Claimant’s share was worth £375,000.00. The Defendants submitted that this was significantly less than their estimated costs. They also submitted that the Claimant had other, non-disclosed assets.
The Court held that the property transfers looked suspicious due to their timing.
The Court then considered whether any order for security would stifle the Claimant’s claim. The Claimant’s total costs were estimated at £1.5 million, based on the Solicitors acting on a CFA with discounted rates, which the Court considered to be “staggering”, even for a case which had a full-rate CFA. The Defendants’ costs were also estimated at £1.5 million, albeit on a full-rate. The Court considered both estimates to be “disproportionate” and considered that £800,000.00 was more reasonable.
In the circumstances, the Court considered that the Claimant would be able to obtain funds from third parties in the sum of £75,000.00 each, which totalled £225,000.00, on the basis that they would benefit substantially should the claim succeed, as well having access to other sources of funds.
The Court order that there would be security of £600,000.00 was reasonable.
08.08.2011RBIL v Ryhurst & Ors  EWHC 2209 (TCC)
Key areas: security for costs; High Court
The Defendant in this matter issued an Application for security for costs.
The claim was for loss of profit caused by a breach of contract. The Defendant counter-claimed over breaches by the Claimant.
The Claimant accepted that there was jurisdiction to make the Order because it was unlikely that they would be able to satisfy an adverse costs order. They submitted that any costs in relation to the counter-claim should be excluded; however, the Court held that the Defendant had shown that the counter-claim would be pursued should the main action be dismissed or abandoned.
The Court noted that both parties’ estimates had been exceeded significantly: the Claimant’s costs were double, while the Defendant’s were triple. The Court accepted that disclosure was significantly more than what had been expected, and the trial had been postponed, but that was not sufficient to justify the difference.
The Court also took into account the fact that the Defendant issued the Application significantly later than when it should have been, based on the information they had to hand.
On the fact, the Court ordered security of £1 million.
05.08.2011JSC BTA Bank v Solodchenko & Ors  EWHC 2163 (Ch)
Key areas: disclosure; funding; costs indemnified by a third party; High Court
The Claimant in this matter issued an Application for disclosure of documents from the Solicitors to the 14th Defendant (Mr. Syrym Shalabayev), Clyde & Co.
The 14th Defendant is in contempt of court in relation to a freezing order, and had been given a prison sentence. However, has was out-of-jurisdiction, and so was still at large.
The Claimant wanted the Solicitors to disclosure his current address and contact details; information which the Solictors had in relation to assets subject to the freezing order; and details of how the Solicitors are being funded.
After considering that it had jurisdiction to order the disclosure of the contact details, the Order was granted in order to help enforcement of the contempt proceedings.
The order for disclosure of assets was refused on the grounds that the information would have been provided in confidence in order to obtain legal advice and would bring them into conflict with their client. The Court also noted that such an Order once granted, would likely be used regularly in other sets of proceedings.
The order for disclosure of funding was also dismissed on the grounds that there was no basis that there were any third parties funding the case, and the Solicitors had provided evidence showing that their invoices had been paid by the 14th Defendant.
02.08.2011Manchester City Council v G;E; & F  EWCA Civ 939
Key areas: basis of assessment; Indemnity Basis; party’s conduct; Court of Appeal
This was an Appeal against an award of costs.
The main action was concerning the removal of children – the Claimants – into care.
At first instance, the local council had been Ordered to pay the Claimants’ costs on the Indemnity Basis until 14th January 2010 and to pay one-third of their costs on the Standard Basis thereafter, on the grounds that there had been “blatant errors”, and because their conduct had been “lamentable”, “deplorable”, “grave” and “serious”.
The council submitted that under r. 157 Court of Protection Rules, no order for costs should have been made, or that costs should have only been awarded to 14th January 2010, which was the date of the first hearing. This was based on the submission that the case was a typical case in the Court of Protection. The Court dismissed it, based on the council’s own actions.
The council submitted that Indemnity costs should not be awarded because the Claimants had not requested them. This was dismissed as the Court held it was due to the council’s own conduct.
The council also submitted that they won overall and so no costs should be awarded after 14th January 2010. This was also dismissed on the grounds that, again,. It was due to the council’s own conduct.
Therefore, the original costs decision was upheld.
01.08.2011Sheikh v Care Quality Commission  UKFTT 474 (HESC)
Key areas: unreasonable conduct; First-Tier Tribunal (Health, Education & Social Care Chamber)
The Appellant in this matter withdrew their claim on the day of the Hearing.
The Respondent then made a claim for costs under r. 10 Tribunal Procedure (First-tier Tribunal) (Health Education and Social Care Chamber) Rules 2008, which they valued at £17,000.00.
Costs can only be awarded if a party “has acted unreasonably in bringing, defending or conducting the proceedings”.
The Respondent submitted that the Appellant had withdrawn their claim on two separate occasions at the last minute, and, on this occasion, the Appellant should have been aware that their main witness would not support them, given that he was a family member.
The Appellant submitted that the witness had only informed them the previous night that they would not support the claim, but prior to this had made a Witness Statement in support.
The Tribunal held that the Appellants had not acted unreasonably in the circumstances.
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