30.04.2013The Royal Bank of Scotland PLC v Highland Financial Partners LP; HFP CDO Construction Corp.; Highland CDO Opportunity Master Fund LP; Highland Capital Management Europe Ltd.; Scott Law Group LLC  EWCA Civ 472
Key areas: both parties win some issues; party’s conduct; Indemnity Basis; Basis of assessment; Court of Appeal
The Appellant had sought an anti-suit injunction against the Respondents, but it had been rejected both at first instance and on appeal, on the basis that it did not have “clean hands”.
In addition, the First to Fourth Respondents had won a cross-appeal on whether the initial liability ruling against them had been obtained through fraud; while the Fifth Respondent had lost a cross-appeal that the anti-suit injunction should rejected due to the Appellant’s misconduct.
The Appellant agreed that it was liable for the First to Fourth Respondents’ costs, but that they should be on the Standard Basis. It also agreed that it was liable for the Fifth Respondents’ costs, but because they won some issues, and due to an overlap between the Respondents’ cases, there should be no order for costs between them and the Fifth Respondent.
The First to Fourth Respondents’ submitted that they should be entitled to all of their costs on the Indemnity Basis, given the Appellant’s fraud, and misconduct. The Fifth Respondent also submitted that its costs should be awarded in full on the Indemnity Basis given the fraud, ad that the issues they lost on were only subsidiary issues, and there was little overlap between their case and that of the other Respondents.
The Court stated that there “was no doubt” that the Respondents won. It held that the issues upon which they lost were minor issues, and that given the Appellant’s conduct, an award of indemnity costs was justified, albeit that the Fifth Respondent’s costs should be reduced by £10,000. In addition, an interim payment of 70% was ordered.
25.04.2013Kim v Park & Ors  EWHC 3568 (QB)
Key areas: both parties win some issues; High Court
This was a hearing to determine applications from the Claimant and First Defendant, and the resulting costs issues.
The Claimants’ application was to strike-out the defence, which was partly granted.
The First Defendant’s application was to adjourn the trial, on the basis that the Court had not informed him of the trial date. This Court approved this application.
The Court noted that it would be unfair to penalise the First Defendant given the circumstances that led to his application, but it noted that he had not attempted to prepare for the trial in any event. As a result, the Claimant was awarded his costs thrown away.
The Claimant was also awarded his costs of his own application to strike-out, as well of the costs of the hearing.
25.04.2013Deutsche Bank (Suisse) SA v Khan & Ors  EWHC 1020 (Comm)
Key areas: costs under a contract; Indemnity Basis; Basis of assessment; High Court
This was a hearing to determine costs issues resulting from a successful claim.
There was a preliminary issue over whether the terms of the contract – specifically the use of “Borrowers” instead of listing each “Borrower” as had been done in other clauses – meant that the Defendants were jointly and severally liable all for the Claimant’s costs, as the Claimant submitted, not that they were only liable for costs resulting from their own conduct, as the Defendants claimed. The Court agreed with the Claimant.
The Court also agreed with the Claimant’s submission that the Defendants acted jointly throughout, and would be jointly liable for costs, in any event.
The next issue was whether costs should be assessed on the Indemnity Basis. The Claimant submitted that the term “all costs” mean that they should be. Again, the Court agreed with the Claimant.
In addition, an interim costs payment of £2.1 million was ordered in the Claimant’s favour.
23.04.2013Costs in Defamation Proceedings
The Civil Justice Council has published its final report into costs in defamation cases. This report was prepared as a result of the on-going Defamation Bill, and as a result of the implementation of the Jackson Report in the Legal Aid, Sentencing and Punishment of Offenders Act 2012, Part 2.
There are numerous suggestions as to how to deal with issues relating to legal costs in libel cases, in particular those resulting from CFAs improve how libel cases are currently dealt with.
As these are only recommendations, it is now for Parliament to determine how to take the matter forward.
The Council noted that these are designed to limit a party’s costs liability, and have been available since before the Jackson Report and its recommendations were published.
It was suggested that the Courts could make greater use of these, but they would not be sufficient to solve issues relating to libel costs on their own.
Protective Costs Orders
The report notes that these are designed to ensure that Claimants won’t be liable for costs, or their outlay would be limited. Effectively, these act in the same way as QOWCS or costs caps.
It states that these only occur in judicial review cases, where there are “general public importance” issues; and given their resources should one not be enforced it is likely the proceedings would be discontinued, and so it is just to enforce one.
The Council did not recommend these.
Aarhus ‘fixed costs’ regime
This was brought in via the recent update to the CPR.
If it applies, then both parties’ costs liability is limited.
While the Council thought it was a “sensible solution”, it only related to very few cases, and given how different and varied defamation cases are, this was not considered to be a viable option.
The Council noted that these exist to give a maximum amount of costs a party will incur, and that there had been a pilot study in defamation cases on their use.
They received the Council’s “unanimous support”, because costs issues could be dealt with early on, but stated that further judicial training would be required to make them effective.
Qualified One-Way Costs Shifting
This has recently been brought into effect in personal injury claims. In the Jackson Report it was also suggested that it be applied to defamation/privacy cases, but has not been done.
It is recommended that an amended version of this be brought in, possibly called “Adaptable Costs Protection” or “Variable Costs Protection” so as to take into account the likely differences in financial status that the parties could be in, unlike in PI cases.
How should protection apply?
Most members of the Council favoured some form of QOWCS. However, some considered that a risk of costs should apply in all cases, on the basis that it could simply lead to inflation of claims; that Judges can already limit costs; and parties can make Part 36 offers to cover themselves.
It was accepted that it may be difficult to determine who should be protected from costs. Some members thought it best to apply to all Claimants, with the Defendants being able to make application to disapply it, while others thought that the Claimants should have to apply for it. Some members thought it should only apply to individuals, while others thought that all Claimants should have the option.
Overall, given practical arguments and issues, the Council considered that protection should apply to all Claimants, but with the option of it being disapplied.
When should protection apply?
Most members of the Council considered that there should be the option to apply for protection at any point and up to any sum. However, some Claimants considered that it should be decided upon at an early stage, and should then apply until disapplied, due to the Claimant’s conduct.
To whom should it apply?
The Council was “completely divided” on whether there should be a means test for a party to qualify for costs-protection, and that while most agreed there should be some sort of test, there was a dispute as to how it would work. Some Claimants considered that it would create satellite litigation, over whether a party should be entitled to protection. Other members were concerned about how the test would work in an effective manner, with one suggesting that the Judge should decide. However, the Council as a whole agreed that a means test was required to distinguish between those who actually needed it to get access to justice, and those who could afford representation.
Given existing caselaw in this area, the Council considered that a test similar to the one used in relation to legal aid – that an adverse costs order would cause “financial hardship” and “severe financial hardship” – would be appropriate. This would be calculated after considering a party’s “accessible liquid assets”, and considered at the first CMC, at which the parties’ costs budgets could be considered. However, it was unable to agree on a specific wording for the means test.
Impact of Part 36 offers
It was “unanimously agreed” that Part 36 offers should impact upon costs-protection, but there were disputes as to what that protection should be.
Some members considered that the usual Part 36 rules should apply should an offer be rejected, but not beat at trial; some considered that in libel cases costs protection should only be lost if a Part 36 offer includes a formal apology; while others considered that Part 36 shouldn’t apply at all, because an early Defendant’s offer could “effectively hold the Claimant to ransom” given the likely costs consequences.
The Council noted that in libel cases it was difficult to determine whether an award was “more advantageous” than an offer, given the impact of apologies and/or retractions. It was suggested that a formal definition of this phrase, in addition to guidance on how to assess the value of apologies, would be required.
It was noted that any existing Part 36 offers would need to be disclosed to reconsider costs-protection, but this would need to be done in front of a different Judge to whom was dealing with the main proceedings.
“Offer to Amends” procedure (s. 2 Defamation Act 1996)
When determining costs-protection, most members of the Council considered that this should be taken into account, and, as with apologies, that there should be a way of valuing them.
How should protection be lost?
The Council considered that there are various situations in which a party should lose protection:
- Claims found to be fraudulent;
- Claims struck-out as abuse-of-process/no reasonable cause of action;
- Failure to beat a Defendant’s Part 36 offer, but with the Claimant only being liable up to the damages awarded
One member suggested that it should also be lost should the Claimant have “wealthy sponsors”, but this was disputed on the basis that there could be public interest reasons for funding the claim.
However, it was agreed that the Judge should have final discretion, based on the facts of the case.
The Council held that not engaging in ADR “should only impact on the incidence of costs”, not that it should lead to a party not having costs-protection. It considered that to do otherwise could force parties to undergo mediation, even where it would not resolve the issue.
One member suggested that a refusal to arbitrate should not lead to a loss of costs-protection, but that a refusal of mediation would do so, upon an application by the other side. However, this was not agreed by any other member.
Overall, the Council made suggestions to how QOWCS/costs-caps should work in libel cases, which it broke-down into four main categories:
- Poor Claimants and rich Defendants;
- Rich Claimants and poor Defendants;
- Rich Claimants and rich Defendants;
- Parties with equal resources
Type 1 cases:
- Claimant wins at trial. Claimant awarded costs in full;
- Claimant wins at trial, but loses interim issues. Defendant’s costs set-off from damages;
- Claimant wins, but fails to beat Defendant’s Part 36 offer. Defendant’s costs set-off from damages;
- Claimant loses. No costs
Type 2 cases:
- Claimant wins at trial. Claimant awarded costs up to pre-existing cap;
- Claimant loses. Defendant awarded reasonable (& proportionate) costs in full
Type 3 or 4 cases:
- Usual costs rules would apply, without caps
One major proposal was the use of Judges that specialise in this type of case, given the “complexities and nuances”. It also suggests that a Costs Judge should be assigned to each particular defamation judge at an early stage, in order to control costs.
They also emphasised that there needs to be “enhanced judicial intervention” to ensure that there is no “unnecessarily disproportionate impact” upon the party without protection.
19.04.2013Walker; Scott; Balchin v Burton; Burton. Burton; Burton v Walker; Walker; The Estate of Elizabeth Chamberlin; Mills; Balchin  EWHC 811 (Ch)
Key areas: CFA; apportionment of costs; retainer; success fee; High Court
This hearing concerned two separate cross-appeals to costs in relation to an adjudication on the lordship of a manor.
The Burtons had been ordered to pay over £157,000 in costs which comprised the full costs of a preliminary issue and 80% of costs of a reference to the Land Registry.
The main issue was over apportionment and liability of costs: the solicitors acting against the Burtons had been instructed on behalf of all the clients, and stated that they were “jointly and severably liable” for their costs.
The solicitors subsequently entered into a CFA that was signed by Walker, Scott & Balchin because they were funding the case.
A Notice of Funding was then served, but this did not refer to the CFA only being signed by 3 of the 6 clients.
They obtained an order for costs in relation to all the clients, and submitted a bill.
The Points of Dispute stated that the Bill only claimed costs for the 3 that signed the CFA, and so the costs should be apportioned, because it was claimed that the others were not liable at all.
At first instance, the clients submitted that apportionment was not required because of the joint-and-severable nature. The Burtons submitted that because nothing was disclosed in relation to the retainer, liability for costs cannot be determined. They were also asked to make written submissions, with the Adjudicator ultimately ruling in the Burtons’ favour.
On appeal, the Court agreed that the adjudicator appears to have assumed the non-CFA clients were liable, but even he changed this position, he still held their costs should be apportioned on a 50:50 basis between those that signed the CFA and those that did not. It held that he was wrong to apportion given his ruling on the CFA itself.
It also held that given the joint-and-severable nature of the agreement, and that all clients use the same arguments, the costs would have been the same.
He then turned to the success fee payable. He held that given the facts know at the time, and risk involved, a 60% success fee was payable.
18.04.2013Accentuate Ltd. v Asigra Inc.  EWHC 889 (QB)
Key areas: hourly rates; proportionality; both parties win some issues; discontinuance; High Court
This was an appeal against rulings in a Detailed Assessment.
The Claimant discontinued the main action, with costs payable to the Defendant, but it had a costs order in relation to an earlier application.
The Claimant’s costs were claimed at £196,000, and had been assessed at £34,503.69; the Defendant’s were claimed at £106,052 and assessed at £74,199. The Claimant also had to pay the Defendant’s DA costs of £20,700.
The Claimant appealed the rulings that it was not entitled to any costs before the interim application was issued, and that the Defendant’s costs were not disproportionate; the Defendant appealed a reduction in its hourly rates.
In the DA hearing, the Judge held that given the technical issues raised, and sum at stake, the Defendant’s costs were not disproportionate. The Claimant, acting in person, referred to the Defendant’s correspondence that it was “unnecessary” to incur costs while a separate application was being dealt with, but costs were being incurred. The Defendant submitted that it was entitled to incur costs to prepare for trial until the case was discontinued. The Court agreed with the Defendant.
The Defendant’s solicitors were based in the City of London, but a lot of the work was done from its Guildford office, and in the DA its rates had been reduce to central London + 20% for certain fee earners. The Claimant submitted that Guildford rates should apply; the Defendant that its Guildford office had been classed as its international practice in previous cases. The Court held that the original ruling was justifiable.
The Claimant then submitted that experts’ fees, although incurred before the application was issued, were related to it, and so should be allowed. However, the Court held that these were part of the main claim, which was discontinued, and so were not claimable.
17.04.2013A and S (Children) v Lancashire County Council  EWHC 851 (Fam)
Key areas: family proceedings; party’s conduct; Basis of assessment; High Court
The Claimants submitted that while it was a set of family proceedings, for which the general rule is no order for costs, it was effectively a civil claim, given the parties’ emphasis on human rights arguments. They submitted that the council “disregarded guidance, advice [and] the fundamental principles of the Children Act 1989”, and that their conduct justified an order for costs on the Indemnity Basis.
The council submitted that it was a set of family proceedings, for which the human rights arguments played a part, and that they also cooperated fully in the case.
The Court accepted that that it was a set of family proceedings, but the council’s actions were “blatantly unlawful and unreasonable and led inexorably to substantial litigation”. However, given its cooperation, only Standard Basis costs were ordered against it.
16.04.2013Murray; Stokes v Neil Dowlman Architecture Ltd.  EWHC 872 (TCC)
Key areas: ATE; costs budgets; relief from sanction; success fee; High Court
This was an application concerning amendments to costs budgets, and relief from sanction.
The Claimants’ solicitors acted on a CFA with ATE, and a Notice of Funding was served.
Budgets were served at the first CMC. The Claimants’ did not comply with the correct formatting, but had enough information for the Judge to say that it “substantially” correct, and approved it in the sum of £82,500.00.
A month later the Defendant’s solicitor informed the Claimants solicitors that their budget made no reference to it excluding ATE or a success fee and so they “intend to argue… that your client should not be permitted to recover any sum” greater than the budget.
The Claimants then issued an application to amend.
The Defendant submitted that it should be rejected because the original budget was “inadequate” due to it not mentioning the success fee or ATE; and that to amend it would make costs management “meaningless” because there would be nothing to stop applications to amend.
However, the Court held that the Defendant was fully aware that ATE and the success fee were in existence; and their issue around shortly after the CMC. Therefore, there was no prejudice. The Court noted that the correct budget format has tick-boxes for excluded items, including ATE/success fees. It also noted that the updated budget specifically excludes ATE/success fees, as well as VAT and court fees.
Therefore, the application was allowed, but because it was due to the Claimants’ error, the Defendant was awarded costs of £3,824.20.
16.04.2013Azzurri Communications Ltd. v International Telecommunications Equipment Ltd. (t/a SOS Communications); Fonesys Communications, Inc.  EWPCC 22
Key areas: patents; costs capping; Patents Court
The case was issued in the High Court, but transferred to the Patents County Court. The Claimant won, and was awarded 80% of its costs to be summarily assessed. This hearing was to determine how the PCC costs caps apply under CPR 45, Section VII.
Under CPR 45.42(1) costs are limited to £50,000 in liability disputes, and £25,000 on quantum issues. The main action had been a combination of the two, and so the Claimant submitted that its costs should be limited to £75,000, i.e. £50,000 plus £25,000.00. The Defendant submitted that the caps relate to separate proceedings, and in this case there was only one set of proceedings.
The Court agreed that because both issues were dealt with together, only the £50,000 cap should apply.
12.04.2013Resolution Chemicals Ltd. v H. Lundbeck A/S  EWHC 739 (Pat)
Key areas: security for costs; High Court
This was a hearing to determine security of costs, among other issues, as part of a patent dispute.
The Defendant accepted that the Claimant would be able to satisfy an order costs, and if it was successful, its costs would be assessed on the Indemnity basis. However, it sought security on the basis that the Claimant could have been party to previous litigation on the patent; that the claim was weak; and that their conduct could be criticised.
However, the Court held that the Claimant had no interest in the product when the previous litigation was taking place; that its case was not weak enough to justify an order; and that the issues of conduct were only of minor importance on the facts.
As a result, the application was refused.
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