A string of recent case law in the UK has provided those of us working in the legal profession with a number of important reminders and clarification on certain points of law in relation to our client retainer and costs.
A number of significant principles have surfaced or in some cases re-emerged over the last few months relating to claim and litigation fee structures, including conditional fee arrangements (CFAs), qualified one-way costs shifting (QOCS) and the proportionality of costs. Drawing on some recent examples of case law, a number of the key principles have been highlighted in the sections below:
Conditional Fee Agreements (CFAs)
Engeham v London & Quadrant Housing Trust and the Academy of Plumbing (in liquidation)  3 Costs LO 357 reminds us of the importance to identify all defendants in a CFA if you wish to recover costs from them. In this case, a Tomlin Order awarded £10,000 plus costs from the second defendant but the claimant was unable to claim costs because the CFA was limited in its operation only to the claim against the first defendant.
Kupeli v Cyprus Turkish Airlines  3 Costs LO 365 outlines the importance and relevance of where a client signed the CFA. Here, the defendants claimed that the CFA was unenforceable because it had been signed at a community centre which was an ‘excursion’ under the Cancellation of Contracts made in a Consumer’s Home or Place of Work Regulations 2008 (then in force) and notice of cancellation in writing had not been provided and therefore, they had no liability in costs to the claimants. The judge on appeal disagreed holding that it was not an excursion and therefore, the claimants were entitled to recover their costs.
Radford v Frade  4 Costs LO 653 highlights the importance of checking the scope of the CFA and ensuring that it covers the work which are you carrying out and hope to recover costs for. The defendant won this case with costs and at Detailed Assessment, submitted a bill of £805,000. The CFA was limited to the pursuit of procedural points and that work came to an end on the making of the Consent Order. The CFA did not extend to work on the defence of the claim, counterclaim or application for summary judgement. Therefore, Radford was not liable to pay for any costs incurred after the consent order.
Surrey v Barnet and Chase Farm Hospitals NHS Trust  4 Costs LO 571 has had many questioning what advice was given to a client who was a late transfer (shortly before 1 April 2013, being the date from which it was no longer possible for claimants proceeding under a CFA to recover success fees and after the event premiums) from legal aid to a CFA? As it stands, the claimant should be entitled to recover the additional liabilities if the switch to CFA from legal aid was a reasonable choice at the time. The fact that the solicitors did not advise him that the switch would deprive him of the 10% uplift on general damages was irrelevant. However, watch this space; permission to appeal to the Court of Appeal is being sought.
Jones v Spire Healthcare Ltd  3 Costs LO 487 tells us that a CFA can be assigned from an old firm to a new firm. In this case, the claimant signed a CFA with a firm that subsequently went into administration. A second firm agreed to acquire the claimant’s case and the claimant agreed to move to the new firm. Following settlement via a Part 36 offer the respondent contended that the claimant was not entitled to costs as there was no longer a valid retainer. The case of Jenkins v Young Bros Transport Ltd  3 Costs LR 495 was followed. It was therefore held that if both firms agree to the assignment and so does the claimant (following being advised of their best interests) and a Deed of Assignment is entered into then it would be ‘unduly restrictive to deny the parties the effects of what they intended’. However, we recommend keeping an eye on this as a case is soon to be appealed to the Court of Appeal in which it was ruled by the District Judge that the assignment was invalid.
In assessing proportionality of costs the court used to avoid ‘double jeopardy’ but since 1 April 2013 Civil Procedure Rule (CPR) 44.3(5) applies and the court will stand back at the end of the Detailed Assessment and reduce the reasonable necessary costs further if required to make them proportionate. The following cases demonstrate.
BNM v MGN  3 Costs LO 441
Damages recovered were £20,000. Costs assessed at Detailed Assessment to be £167,000. Cut to £83,000 after considering the proportionality issues.
May v Wavell Group plc  3 Costs LO 455
Damages recovered were £25,000. Costs assessed at Detailed Assessment to be £99,000. The award was reduced to £35,000 plus VAT.
Qualified One Way Costs Shifting (QOCS)
Parker v Butler  3 Costs LR 435 demonstrates that any appeal which concerns the outcome of a claim or the procedure by which it is to be determined, is part of the proceedings as defined in CPR 44.13 and therefore, QOCS will apply.
Sarpd Oil International Ltd v Addax Energy SA  2 Costs LO 227 demonstrated that the court can take into account incurred costs even if set out in a costs budget, when considering the reasonableness and proportionality of estimated costs. It was only in relation to the formally approved estimated costs contained within the costs budget that the court would not depart from.
Group Seven Ltd v Nasir  2 Costs LO 303 highlights the importance of being able to justify your hourly rates, number of people involved in the case and location of the Solicitors. The judge in this case looked at all costs and held that retention of two leading and one junior counsel was not reasonable or proportionate, the case did not involve any sophisticated issues and therefore instructing City of London solicitors was unnecessary (apart from the bank whose decision as a foreign party to instruct London solicitors was understandable), the rates for a City firm would be allowed by reference to the 2010 Guideline rates and the budgeted fees for counsel were reasonable. However, note that the 82nd update at PD3 E7.10 published shortly after states that it is not the role of the court to fix or approve hourly rates.
Churchill v Boot  4 Costs LO 559 highlights that a costs budget can be amended once it has been set only if there have been significate developments in the case within the meaning of CPR PD 3E para 7.6. In this case the claimant was refused permission to amend his cost budget. It was held that the doubling of the amount claimed, the adjournment of the trial and the further disclosure which has led to updated expert reports were not significant developments because the parties could have envisaged these developments at the time of the original costs budget.
Various Claimants v MGN  EWHC 1894 (Ch) reminds us of what type of costs can be fixed under a costs budget. The court ruled that the determination of figures in the costs budgeting exercise should not include the additional liabilities of the CFA uplift and after the event insurance premiums. It was pointed out that CPR PD 3E para 6(a) provided that unless the court ordered otherwise, a budget had to be in the form of Precedent H. On Precedent H, below the summaries of costs under various headings is the following wording, “This estimate excludes VAT (if applicable), success fees and ATE insurance premiums…..”. The court held that this is a clear direction as to what should not be included.
Bolt Burdon v Tariq  4 Costs LO 617 serves as a reminder of the provisions of Part 36.17 (4). The bank offered a sum as compensation. The firm negotiated a higher sum and claimed fees on the contractual interest that had been awarded, as well as on the principal sum. The defendant objected. The firm made two offers under CPR Part 36. The judgement against the defendants was at least as advantageous as the proposals in the Part 36 offers. The main questions was whether any additional amount was payable within the meaning of r36.17(4)(d) in relation to the firm’s award for contractual interest. The court held that it was because the fees on the contractual interest constituted an additional amount.
The Solicitors Act 1974
Rosenblatt v Man Oil Group SA  4 Costs LO 539 provides us with a reminder on varying the terms of a retainer with a client. The firm in this case had agreed a fixed fee with a client but on the proviso that it could revisit the fixed fee if any of the assumptions on which they were based proved to be incorrect. The court held that the firm was obliged to notify the client of its intention to change its fee and seek the client’s agreement. As a result, the firm was only entitled to the lower fixed fee of £92,500 plus disbursements instead of their entire bill of £537,949.
The obligations to the client and the Court are always evolving with case law this summary of recent important decisions and reminders takes us back the basics:
- Is the CFA valid?
- Is the assignment of the CFA valid?
- Can you demonstrate the costs are proportionate?
The recent twitter libel case involving the controversial newspaper columnist Katie Hopkins with an award of damages of £24,000 and a interim costs award of £100,000 shows that if the Court is satisfied that the costs are merited they will still make interim payments but the referral for a detailed costs assessment also shows even then the issues will be reviewed.