The Judgments Act 1838 and Interest on Legal Costs
Under the Section 17 of the Judgments Act 1838, a receiving party can claim 8% interest on unpaid legal costs. The burden for interest can be reduced by virtue of completing a realistic assessment assessment of the amount of costs payable, and raising a payment on account. Interest will not run on any payment of costs made on account and thus it is worthwhile making such payments to reduce the overall costs payable by a paying party. S17 of the Judgments Act applies to cases settled by way of a Part 36 Offer or a sealed Order, thereby providing for a judgment debt. In many recent cases, there have been questions raised on whether the rate at which interest runs on legal costs should be reduced, and also the date from which interest should run (the principle dispute has often been where interest runs from the date of the Order for costs, or the date of agreement of costs).
This was demonstrated in the case of Hunt v RM Douglas (Roofing) Ltd  1 AC 398 when it was established that interest would be recovered from the date of judgment (Part 36 acceptance or Order providing for detailed assessment), and not when costs are assessed.
CPR 44 and Interest on Legal Costs
Under CPR 44.2(6)(g), there is a provision for interest on legal costs to be claimed pre-judgement. CPR 44.2(6)(g) states:
“The orders which the court may make under this rule include an order that a party must pay interest on costs from or until a certain date, including a date before judgment.”
However, according to the Senior Courts Costs Office Guide;
“The power to order interest to run from a date other than the date of judgment has, as at the date of preparing this guide, been found to be ultra vires in the county court until the Treasury takes certain steps to validate it. For the time being, in county court cases, interest on costs (other than the costs of assessment) will always run from the date of judgment.”
Involnert Management Inc v Aprilgrange Limited & Ors
In the case of Involnert Management Inc v Aprilgrange Limited & Ors  EWHC 2834 (Comm), the paying party wished to have the Court make a costs order with interest on costs running from 6 months after the order for costs. The receiving parties argued that interest should run from the date of Judgment.
Leggatt J determined that, under the Judgments Act, the default date from which interest is payable is the date on which the Costs Order is made. However, he asserted that neither the CPR, nor the Judgments Act restricted the power of the Court to order interest to run from an alternative date. He also referred to the interest rate stated in the Judgment Act and stated:
“I do not think it just in these circumstances that interest on whatever further sums the claimant is ultimately found liable to pay to the defendants and OAMPS should begin to run at the rate applicable to judgment debts before the claimant has been provided with a detailed statement of the costs claimed so that it can take an informed view of the amount its liability.”
It was therefore held that interest on legal costs should run at 2% above the Bank of England base rate from the date on which judgment for costs was entered, until three months after the costs orders were made. It would then run at the 8% rate as prescribed by the rules after this date on the basis that by this point, the paying party had been provided with a Bill of Costs. This stance should be adopted in any negotiations as it encourages a receiving party to commence detailed assessment proceedings promptly, and expedites the legal costs process/reduces the overall costs burden.
Pre-Judgement Interest on Legal Costs
The Court has power to award pre-judgment interest on costs under CPR CPR 44,2(6). This type of award would usually be used to compensate a party who has had to borrow money for their legal costs, or a party who has been deprived of the use of their money. The Court will usually assess this on a case by case basis to decide what is reasonable in the circumstances.
It was established in the case of Hunt v RM Douglas (Roofing) Limited (1987) TLR, 23, and Motto & Ors v Trafigura Ltd & anor  EWCA Civ 1150 that interest on funding costs could not be recovered as an item within the Bill of Costs however, it was held in the case of Jones & Ors v Secretary of State for Energy and Climate Change, that a pre-judgment award for interest may be permitted in certain circumstances.
In the case of Powell v Herefordshire Health Authority  EWCA Civ 1786, the Court of Appeal held that the Court has discretion to award pre-judgment interest on costs dependant on the circumstances.
In the case of Schuman -v- Veale Wasborough  EWHC 4070 (QB), a Judge refused to award pre-judgment interest on costs to a successful Defendant;
“In this case I have decided not to order interest to be paid on the costs paid to legal representatives before judgment. This is for a number of reasons. First the making of such orders is not usual. This is not necessarily a reason for not making such an order, but it suggests that there might be proper reasons for not making such an order. I consider that there are good reasons for not making such an order, as appears below. Secondly the exercise of the costs jurisdiction has always been rough and ready.”
How Can LPS Assist?
The Legal Practice Support team are always happy to help/advise on any costs issues, including the recovery of interest on disbursement funding loans. If you would like to find out more, please feel free to view the legal costs section on our website for further guidance. Our Costs Director, Robert Collington, can be contacted via email on firstname.lastname@example.org or by telephone on 01204 397302.
Disbursement funding loans are becoming an increasingly popular method for law firms to assist in funding expensive litigation and maintain cash flow, for instance in clinical negligence claims or commercial disputes. However, such loans come attached with interest payments. The question on whether interest paid on a disbursement funding loan can be recovered by a successful party has cropped up in a number of recent cases.
Recovering Interest as a Cost
It has long been established that costs of funding are not recoverable inter-partes and therefore should not be claimed as an item within the Bill of Costs. This was shown in the cases of Hunt v RM Douglas (Roofing) Limited (1987) TLR, 23, and Motto & Ors v Trafigura Ltd & anor  EWCA Civ 1150. As such, there is a question mark as to whether interest on a disbursement loan would form a part of costs of funding, which would thus not be recoverable inter-partes.
Recovering Interest on Costs
Under CPR 44.2(6)(g), the Court can award interest on costs. Typically, such interest would run from the incipitur date for costs (when any order is made for costs to be assessed, or the date of any Part 36 Offer acceptance). As the interest on any disbursement loan would have accrued prior to this date, this would be at odds as to the usual award for interest, and the question would therefore arise as to whether pre-judgment interest could be recovered.
Jones & Ors v Secretary of State for Energy and Climate Change
In the case of Jones & Ors v Secretary of State for Energy and Climate Change & Anor  EWHC 1023 (QB), it was established that pre-judgement interest was recoverable on a credit agreement. In her Judgment, Mrs Justice Swift stated that the credit agreement obtained by the Claimant to fund the personal injury claim;
“provided a means by which the claimants could obtain funding for their disbursements without being required to advance any monies themselves and without financial risk since the credit agreements provided that, in the event of a claim failing, the disbursements would be paid by the ATE insurers”.
It was held that interest should be paid at an interest rate of 4% above base, which was also upheld by the Court of Appeal.
Can Interest be Recovered on a Disbursement Funding Loan?
Theoretically yes however, this would be wholly dependant upon a pre-judgment award for interest being permitted which is uncommon. It is therefore likely that the client should be made aware of interest on any disbursement loan, and that this may be deducted from damages, to avoid any reduction to costs recovered. Other factors that may also be taken into account were also highlighted in the recent case of Nosworthy v Royal Bournemouth  EWHC B19(Costs), in which it was highlighted that disbursement loan interest may be disallowed due to:
- The availability of any other funding sources, such as BTE, which is commonly considered before entering into a CFA.
- Any other interest recovered. In Nosworthy, in excess of £500 interest was recovered for the general costs, and thus it was stated this could be offset against any disbursement loan interest.
- Similar to Court fees remissions, does the client actually require a disbursement loan or do they have sufficient income/savings to fund the same?
Update – 10 July 2020
In the matter of Marbrow v Sharpes Garden Services Limited  EWHC B26 (Costs) heard in the SCCO, it was reaffirmed that interest should run from the incipitur date. It was considered in principle that pre-Judgment interest on disbursement funding was recoverable, and that there was a powerful argument to allow this if the receiving party had struggled to fund litigation. In the circumstances however, the interest accrued on the loan was not considered so significant as to warrant the award of pre-Judgment interest, and that the standard 8% recovered in interest from the incipitur date was adequate to offset against the disbursement loan interest.
It is therefore important that if a claim is to be made for pre-Judgment interest on a disbursement loan, that the client’s circumstances have been taken into account (and those of the Solicitor in justifying the appropriate rate of interest that should apply). Marbrow also reaffirmed that interest on a loan should not be included as an item in the Bill, and that it should be made alongside the usual claim from interest on agreement of the main costs.
How Can LPS Assist?
The Legal Practice Support team are always happy to help/advise on any costs issues, including the recovery of interest on disbursement funding loans. If you would like to find out more, please feel free to view the legal costs section on our website for further guidance. Our Costs Director, Robert Collington, can be contacted via email on email@example.com or by telephone on 01204 397302.Read More
What is a Precedent H Costs Budget?
A Precedent H Costs Budget is used at the beginning of the litigation process and outlines the details of any costs expected to be incurred throughout the case. Practice Direction 3E sets out the rules for case management, including costs budgeting .
A Costs Budget should include all base costs incurred to date, future costs expected to be incurred throughout the case up to and including trial. All solicitor’s fees and disbursements, such as Court fees should be included within the budget.
Deviating from a Budget
In the case of Harrison V University Hospitals it was established that a Costs Judge could only depart from Precedent H if there was good reason to do so. It has since been difficult to establish exactly what would constitute a good reason to depart from a Precedent H costs budget as the Court did not provide any guidance on this.
In the case of RNB v London Borough of Newham it was held that a reduction in hourly rates did amount to a good reason to deviate. In this case, master Campbell stated:
“At the assessment hearing, I made reductions to the hourly rate claimed for the incurred costs to a level which has meant that the overall recovery by the Claimant for the period of work before the Costs Management Order has been reduced by significant amounts. Were that not to be reflected in the budgeted costs, that would mean that the Claimant will appear to recover an hourly rate as set out in Precedent H for the budgeted stage, at a level that significantly exceeds the figure I consider to be reasonable for the pre-budget stage.”
This decision was later decided the other way in the SCCO and ultimately, this guidance has been followed since that a change in hourly rates did not constitute a ‘good reason’ to deviate from a Costs Budget.
Utting V City College Norwich
In the recent case of Utting V City College Norwich there was yet another debate on what would constitute a good reason to depart from an approved Precedent H Costs Budget. In this case it was debated whether an underspend would constitute a good reason.
Master Brown held that, in this case, the underspend could not amount to a good reason to depart from the budget and he therefore refused to reduce the amounts claimed for phases that ‘had not been substantially completed.’ This was contrary to the decision made in Barts Health NHS Trust v Salmon.
Master Brown stated in Utting that:
“even if ‘underspend’ were a “good reason” for the purpose of CPR 3.18 it does not follow that there should be a deduction from the sums claimed. Plainly, the fact that a party has spent less than its budget for a phase does not mean there is therefore in fact a good or appropriate reason for any further reduction and I was not satisfied that there was any additional “good reason” for any such reduction.”
As such, unless it can be demonstrated that the expenditure in an incomplete phase of Precedent H Costs Budget is unreasonable, then there is no ‘good reason’ to reduce the costs claimed as under the approved expenditure of the phase.
How Can Legal Practice Support Assist?
The Legal Practice Support team are always happy to help with any budgeting issues. If you would like to find out more about best practice in preparing your Cost Budget, please feel free to view the section on our website for further guidance. Our Costs Director, Robert Collington, can be contacted via email on firstname.lastname@example.org or by telephone on 01204 397302.Read More
What is a Fee Challenge Under the Solicitors Act 1974?
Part III of the Solicitors Act 1974 regulates the amount of disbursements and costs which a Solicitor can invoice within their bill to their client. Under this Act, the client has the ability to dispute the fees, such as success fee deductions, and disbursements within the Solicitor’s bill. This act applies to a large range of practice areas, including personal injury cases, conveyancing cases and contentious business litigation.
With many companies now offering services to clients to assist in disputing their legal fees, these types of challenges are becoming more commonplace in the legal industry, which is why it is important that solicitors are aware of their duties under the Act, when opening and closing files. It is also important that they know how to defend this type of claim, if and when they arise.
What Should a Solicitor do When Opening a File?
If the case is based on a Conditional Fee Agreement, it is important that the Conditional Fee Agreement is drafted properly, and does not just routinely charge a 100% success fee. In the case of Herbert v HH Law  EWCA Civ 527, it was shown that solicitors should undertake a proper and bespoke risk assessment at the start of every case, instead of applying a 100% success fee as standard across all cases. The success fee calculated will determine what deductions can be taken, if any, from the client’s damages.
It should also be noted that any retainer must make clear that the client may be charged more than they recover from the other side, as otherwise the Solicitor risks being limited to calculating any success fee as against any fixed costs recovered, in Fast Track personal injury litigation.
What Should a Solicitor Do When Closing a File?
The most important step which a Solicitor should routinely take when closing a file, is serving a signed statute bill. A Solicitor cannot enforce their fees to a client unless a statute bill has been properly delivered to the client, but equally, the timescale for a client to contest any deductions from their damages runs from the date of service of a statute bill. If enforcing a Bill, the Solicitor has several options open to them to collect payment, including the obtaining of a charging order.
If you serve a statute bill, this starts the clock ticking on any timescale for the client to contest any deductions. This timescale is limited to one month if the statute bill is paid (which in the event of damages deductions, payment is immediate). If the bill is not discharged, the same can be contested for up to twelve months post-service of the document.
The statute bill should include a description of all work done on the file, and should be delivered to the client via post, in person, or via e-mail, if the client has requested.
It is also imperative that you make sure any success fee deductions from damages is calculated correctly. This must comply with the retainer, in that the correct success fee is used, and charges calculated against the WIP incurred at the hourly rates detailed in the CFA (presuming it states that the client may be charged in excess of any amounts recoverable from a paying party).
Deductions must also comply with statute, and can only be calculated based on past damages (not future losses), and be capped at 25% of the same.
When Should a Statute Bill be Served on a Client?
- At the end of the case, when all of the work agreed under the retainer or CFA has been completed.
- Interim statute bills can be served when there is an express agreement for the solicitor to do so, and the client has been made aware of their entitlement to assessment under the Solicitors Act 1974.
- Following a natural break within the litigation process, which allows each portion of the work being done to be treated as a distinct and separate part of the litigation.
- Following the termination of a retainer or CFA, for example, if the solicitor has a good reason to terminate the CFA or retainer.
Defending a Challenge Under the Solicitors Act 1974
Proceedings for a challenge under this act can be held in the High Court or the County Court, and are dealt with under Part 8 of the CPR. The Solicitor can contest the Claimants entitlement to assessment, if there is sufficient reason to do so. If the Solicitor does not, or cannot contest the entitlement to assessment, section 46.10 of the CPR will apply for the costs to be assessed, in a similar procedure to that of detailed assessment.
How Can LPS Assist?
The Legal Practice Support team are always happy to help with any costs issues, including defending costs challenges under the Solicitors Act 1974. Our Costs Director and Costs Lawyer, Robert Collington, can be contacted via email on email@example.com or by telephone on 01204 397302.
If you would like to find out more information on preparing your Cost Budget, Bill of Costs, or the process of detailed assessment, have a look at these sections on our website. Feel free to have a look at our legal costs section to find out more about out legal costs services.Read More
What is a Cost Order?
Legal costs are incurred in all cases. The unsuccessful party will be responsible for paying the costs incurred by the successful party in an inter-partes matter. A cost order, put simply, is an Order made by a Judge, under CPR 44, to decide whether costs are payable, and the level of costs payable by the unsuccessful party, to the successful party.
When can a Cost Order be Made?
A Judge can award costs at any stage throughout a case. There are different types of cost orders, such as final costs orders, which are made on conclusion of a case, and interim costs orders, made following an interim hearing.
After Which Type of Hearing Can a Cost Order be Granted?
An order for costs can be granted after any court case or hearing, including a disposal hearing, an application hearing, or a trial. A successful party can also claim costs following acceptance of a part 36 offer, or after the filing of a Notice of Discontinuance.
What Should I Do if I Have Received an Order for Costs?
When you have received an order for costs, you should check to see if the order is made against you, or in your favour. You should also check if the costs are summarily assessed or ordered for detailed assessment.
Summarily Assessed Costs
If you have received an order for costs against you for summarily assessed costs, this means that you should pay the costs awarded to the receiving party within 14 days, unless otherwise stated. The amount payable should be stated on the order.
If you have received an order for costs in your favour for summarily assessed costs, this means costs are owed to you by the paying party and should be paid within 14 days. If payment is not received, then enforcement action can be taken via various methods, including a Warrant of Control, Warrant of Possession or Third Party Debt Order.
Costs Ordered for Detailed Assessment
If you have received this type of order against you, you should wait for the receiving party to serve their bill of costs and Notice of Commencement. You should then file any Points of Dispute within 21 days as required by CPR 47.9. You should then wait for the receiving party’s Points of Reply and attempt to negotiate a settlement before proceeding to an assessment hearing.
If you have received a cost order for detailed assessment in your favour, you should instruct a Costs Draftsman to advise on the costs you can recover, and to prepare and serve your Bill of Costs on the paying party alongside the Notice of Commencement. This will initiate detailed assessment proceedings and you should attempt to negotiate a settlement before proceeding to an assessment. In an attempt to negotiate a settlement, you should wait for the paying party’s Points of Dispute and respond with your Points of Reply.
If the paying party do not send their Points of Dispute within 21 days, you will be able to apply for a Default Costs Certificate for the full amount claimed in the Bill of Costs.
How Can LPS Assist?
The Legal Practice Support team are always happy to help with any costs issues, including negotiating your bill of costs. Our Costs Director, Robert Collington, can be contacted via email on firstname.lastname@example.org or by telephone on 01204 397302.
If you would like to find out more information on preparing your cost budget, bill of costs, or the process of detailed assessment, have a look at these sections on our website. Feel free to have a look at our legal costs section to find out more about out legal costs services.Read More
Part 44 of the Civil Procedure Rules sets out the general rules about costs, including the rules on Proportionality when conducting detailed assessment, as well as the factors which should be taken into account when deciding the amount of costs, dealt with under CPR 44.4. At detailed assessment, the pillars of wisdom, found under CPR 44.4(3) are often also taken into consideration when considering the total amount allowable, particularly in relation to hourly rates.
CPR 44.3 and Proportionality
CPR 44.3(5) states that “Costs incurred are proportionate if they bear a reasonable relationship to (a) the sums in issue in the proceedings; (b) the value of any non-monetary relief in issue in the proceedings; (c) the complexity of the litigation; (d) any additional work generated by the conduct of the paying party; and (e) any wider factors involved in the proceedings, such as reputation or public importance.”
This rule of proportionality is of high importance when drafting your Bill of Costs. Factors of proportionality are very often raised in an opposing parties Points of Dispute; therefore, it is essential that all parties know how to approach proportionality when it comes to detailed assessment.
The Court of Appeal provided some very useful guidance on proportionality in the case of West v Stockport NHS Foundation Trust & Demouilpied v Stockport NHS Foundation Trust  EWCA Civ 1220 . In section 9 of this case, it was clarified that , although the typical factors of CPR 44.3(5),(which states that costs should bear a reasonable relationship to certain factors) should be taken into consideration, CPR 44.4(1) should also play a part in our approach to proportionality.
It was stated in this case that certain elements, such as Court Fees, VAT and costs of preparing the bill, should not be included in proportionality reductions as they were considered “fixed and unavoidable.” It was, however, stated that Solicitor and Counsel fees were to be controlled by the test of Proportionality.
Section 10 of the case provides guidance on approaching issues of proportionality in a detailed assessment of costs. It stated:
“First, the judge should go through the bill line-by-line, assessing the reasonableness of each item of cost. If the judge considers it possible, appropriate and convenient when undertaking that exercise, he or she may also address the proportionality of any particular item at the same time. That is because, although reasonableness and proportionality are conceptually distinct, there can be an overlap between them, not least because reasonableness may be a necessary condition of proportionality:”
CPR 44.4 (3) – The Pillars of Wisdom
The rules set out in CPR 44.4 (3) have came to be known as the pillars of wisdom. They are often used in parties’ Points of dispute to justify aspects of their costs, such as hourly rates. This section of CPR 44 states that the Court will take into consideration:
“the conduct of all parties,… the amount or value of any money or property involved, the importance of the matter to all the parties, the particular complexity of the matter or the difficulty or novelty of the questions raised, the skill, effort, specialised knowledge and responsibility involved the time spent on the case, the place where and the circumstances in which work or any part of it was done, and the receiving party’s last approved or agreed budget.”
In the case of Merrix v Heart of England NHS Foundation Trust  EWHC B28 (QB) (13 October 2016), Judge Lumb explained that this section of CPR 44 should “be taken into account when deciding the amount of costs to be allowed apply both at the budgeting and assessment stages.”
He further commented that “as the tests are applied at different times when considering different documents (a budget and a bill) there is no certainty that they would produce identical results.”
How Can Legal Practice Support Assist?
The Legal Practice Support team are always happy to help with any costs issues, and our Costs Director, Robert Collington, can be contacted via email on email@example.com or by telephone on 01204 397302.
If you would like to find out more information on preparing your bill of costs, or the process of detailed assessment, have a look at these sections on our website. Feel free to have a look at our legal costs section to find out more about out legal costs services.
In addition, if you would like any information on how your Proclaim system can be developed to track proportionality of your costs, or to assist with with the preparation of the new electronic bill of costs, get in touch with our Head Proclaim Developer, James Denby, via e-mail on firstname.lastname@example.org.Read More
Accepting or rejecting a Part 36 Offer can come with some very significant consequences which are set out in in Sections 13 and 17 of CPR 36. These consequences highlight the importance of ensuring that the Part 36 Offer being made is valid as it can have a large impact on the level of costs which can be recovered. The judgment in the recent case of King V City of London Corporation is of great value to costs lawyers as it highlights the significance of the structure and contents of a valid Part 36 Offer. In this case, the validity of a Part 36 was questioned as the offer was made exclusive of interest. In the case of Horne v Prescot (No 1) Ltd  EWHC 1322 (QB), it was held that a Part 36 Offer made exclusive of interest can be effective in the context of detailed assessment proceedings however, the Court of Appeal has now clarified their position on the matter in King V City of London Corporation and held that a Part 36 Offer cannot be valid when interest has not been included in the offer.
What is a Part 36 Offer?
A Part 36 Offer is usually made as a tactical step to settle the claim early without having to proceed to Court or a Trial. It is an offer to settle all, or any part of a claim, which can be made by either a Defendant or Claimant, without prejudice save as to costs. The rules for making such an offer can be found under Part 36 of the Civil Procedure Rules.
Making and Accepting a Part 36 Offer
A Part 36 Offer can be made at any time in the claim and can be made before the commencement of proceedings. The offer should be made in writing, clarifying which part of the claim the offer applies to and confirming that it is a Part 36 offer. The offer should be open for acceptance for at least 21 days.
If a Claimant rejects a Part 36 Offer and proceeds to trial, they will be required to pay the Defendant costs “from the date on which the relevant period expired to the date of judgment” in the event that they fail to obtain a judgment which is better than the Defendant’s Part 36 Offer.
If a Claimant makes a Part 36 Offer which the Defendant fails to beat at trial, the Claimant will be awarded a 10% uplift on damages as well as the entitlement to recover costs from the date of expiry of the relevant period, on an indemnity basis, including interest on those costs up to 10% above the base rate.
If a Defendant accepts a Part 36, the claim will be stayed from the date of acceptance.
King V City of London- Facts of the Case
On 15th February 2017, a consent order was agreed stating that City of London Corporation should pay the Claimant, £250,000 plus costs “to be assessed if not agreed on the standard basis.” Detailed assessment proceedings were commenced after the Claimant served his bill of costs. On 12th December 2017, a letter was sent on the Claimant’s behalf and was headed “Part 36 Offer” and stated that they would accept £50,000 in full and final settlement of the costs detailed within the Bill. They also stated;
“This offer is made pursuant to CPR 36. The offer is open for 21 days from deemed service of this letter. If the offer is accepted in this time the Defendant shall be liable for the Claimants costs in accordance with CPR 36.13. The offer relates to the whole of the claim for costs within the Bill and takes into account any counterclaim but excludes interest.”
On 13th June 2018, a detailed assessment was held as the City of London did not accept the offer to settle costs. The bill was assessed at £52,470 excluding interest. This meant that the amount offered to the Claimant was higher than their offer and, if the Part 36 Offer was indeed valid, the Claimant should be entitled to the interest on the costs of up to 10% above the base rate. The question for the Court now, was to decide whether the Part 36 was valid as it expressly stated that it excluded interest. The Judge at the Court of Appeal held that a part 36 Offer cannot exclude interest and stated;
“a Part 36 offer must, if it offers to pay or accept a sum of money, be inclusive of all interest, as CPR 36.5(4) says. Interest cannot be hived off. True it is that, on occasion, there may be room for substantial dispute as regards interest and that the amount at stake could be large, but the same could be said about costs.”
The Claimants then presented the argument that the offer could be construed as an offer to include interest, this was also rejected by the Court with the Judge stating;
“To my mind, however, it is inconceivable that CPR 36.5(4) was meant to turn an offer specifically stated to be exclusive of interest into one including interest. That would grossly distort the offeror’s intentions. Had the City accepted the offer, Mr King would have found himself unable to claim interest even though he had said in terms that interest was to be excluded.”
Why is the Decision in this Case Important?
The decision in this case highlights the importance of making sure your offers are valid and compliant with the rules set out in Part 36 of the CPR. It demonstrates how an invalid Part 36 Offer can have major consequences for the recovery of your firm’s legal costs.
How Can we Assist?
The Legal Practice Support team are always happy to help with any costs issues, and the author can be contacted via email at email@example.com
Our Costs Director, Robert Collington, can be contacted via email on firstname.lastname@example.org or by telephone on 01204 397302.
In addition, if you would like any information on how your Proclaim system can be developed to ensure the content of your Part 36 Offers are automated to ensure validity, or to assist with with the preparation of the new electronic bill of costs, get in touch with our Head Proclaim Developer, James Denby, via e-mail on email@example.com
You can also get in touch with us via the Contact Page on our website.
What is ATE Insurance?
After the Event Insurance is used by many Claimant law firms in England and Wales and is also known as Legal Expense Insurance. It is a type of policy that provides the Claimant with legal protection against paying the Defendant’s legal costs in the event their compensation claim is unsuccessful. After the Event ATE insurance is usually offered in no win, no fee claims and is purchased by the Claimant at the start of the claim but is only payable if the claim is successful and paid at the end of legal action. There are many types of Legal Expenses Insurance which provide protection for Claimants in disputes such as property, employment, personal injury or contracts for goods and services.
How Much Does ATE Insurance cost?
The cost of an ATE Insurance premium depends on the type of case being pursued, as well as the prospects of success for the case and when the policy is purchased. The cost of the cover is usually only payable if the claim is successful and most law firms will deduct the cost from the Claimant’s compensation on completion of the case.
What Costs are Covered by ATE Insurance?
In many types of claims, Claimants can be held liable to pay the costs incurred by the Defendant in the event that the claim is unsuccessful. The types of costs that ATE insurance covers include the disbursements incurred by both the Defendant and Claimant Solicitors including Court fees, Counsel’s fees, medical reports etc.
Is ATE Insurance Necessary if QOCS Applies?
In Personal Injury claims which commenced before April 2013, the Claimant’s Solicitors could claim the costs for their ATE Insurance and their success fee from the Defendants in the event that their claim was successful. If a claim was unsuccessful, defendant’s costs were paid by the ATE Insurer.
After 1st April 2013, Qualified One-Way Costs Shifting (QOCS) was introduced for all Personal Injury claims. Introduction of QOCS means that a successful Claimant will be able to enforce their costs against the Defendant however, a successful Defendant will be unable to claim costs against the Claimant in most cases.
Following the changes made in April 2013, the Claimant in a Conditional Fee Agreement claim is now responsible for covering the costs of the ATE Insurance and the success fee. The success fee is now capped at 25% of the damages awarded excluding damages for future loss and care and is usually deducted from the Claimant’s damages when the case has settled.
QOCS was introduced to protect the Claimant from having to pay the Defendant’s costs in an unsuccessful claim. If this is the case, then why are ATE Insurance policies still taken out for personal injury claims?
Why is it Prudent to Purchase ATE Insurance Products in a Personal Injury Claim?
Unfortunately, there are some circumstances where the Claimant may end up paying the other side’s costs, which is why taking out ATE insurance is always a good idea when pursuing a personal injury claim. An ATE policy would usually cover the costs in the following circumstances:
- If a Defendant makes a Part 36 offer and the Claimant fails to beat the offer, they risk having to pay the Defendant’s costs up to the level of damages recovered.
- If there are disbursements on a claim such as the fees for medical reports, and the claim fails, the cost of the disbursements will not be recoverable from the Defendants.
Are There Circumstances Where an ATE Provider Can Refuse to Pay Out?
Many LEI agreements are subject to extensive and onerous clauses. An assessment of costs is usually carried out by an ATE provider and whilst the assessment is usually in the Claimant’s favour, there are circumstances when the provider can refuse to pay the costs and disbursements in a claim. If a claim is unlikely to succeed, it is unlikely that a Legal Expenses Insurer would agree to fund the case. If a case which has been taken on by a Claimant Solicitor with prospects of success of less than 51%, fails, any disbursements on the case will not be covered by the ATE Insurer. The LEI may also refuse to pay out in cases with any element of fundamental dishonesty, misrepresentation or fraud, as well as if the claim has been handled poorly.
How can we Help?
ATE Premiums remain recoverable in inter-partes disputes in clinical negligence cases, and thus it is crucial that you obtain expert Costs Draftsman input to ensure any premium is recovered in full.
LPS can provide an impartial service in drafting your Bills of Costs and negotiating this with either a paying party of the LEI provider. We will ensure that the best result possible is achieved and that any outcome is in line with a reasonable and comparable detailed assessment determination. We will only charge on a % basis of the profit costs recovered, and often our charges are recoverable from the LEI provider.
To find out more on how we can help with LEI Claims, have a look at our website. Our Costs Director, Robert Collington, can be contacted via email on firstname.lastname@example.org or by telephone on 01204 397302. You can also get in touch with us via the Contact Page on our website.
What is a Precedent H Cost Budget?
A legal costs budget is often referred to as a Precedent H. A costs budget is used at the outset of litigation and outlines the details the costs that the receiving party expects to recover on conclusion, and also outlines where time and efforts should be focused during the course of litigation.
Which Type of Case Requires a Precedent H to be Filed?
A Precedent H is required in all Multi-Track cases. A Costs Budget is not required in any minor claim, claims which are valued in excess of £10,000,000 or in a claim where the Court has decided that a Budget is not required.
What should a Precedent H Include?
A Precedent H costs budget should include the following:
- Your base costs incurred to date
- The future costs to be incurred for the entirety of the case up to and including Trial
- Anticipated costs should only account for what is reasonably foreseeable, and is catered for in any draft directions and the Directions Questionnaire. The Budget cannot account for every possible eventuality in the litigation.
Additional liabilities such as the success fee or ATE premiums should not be included in the costs budget, neither should VAT. Costs for the Precedent H Budget and the Costs Management process do not form part of the main figures, but can be located in the bottom right of the front sheet of the Budget as the respective 1% and 2% figures.
In addition, the costs of interim applications are generally not included (for instance for varied directions), as these can be claimed outside the scope of a Costs Budget on conclusion of the case.
Which CPR Provisions Apply to Precedent H Budgets?
Practice Direction 3E sets out the rules for costs management. It is worth noting the recent changes to Paragraph 7.4 of the Practice Direction which you can read more about in our recent article to find out how the changes can impact on your cost budgets.
Are There Any Deadlines for Filing a Costs Budget?
There is a strict deadline for filing the Precedent H which must be met or the penalties can be severe, reducing the chance to recover legal costs from the other side. Costs Budgets must be filed alongside the Directions Questionnaire if the value of the claim is less than £50,000. If the claim value exceeds £50,000, the Costs Budget must be filed 21 days before the first Costs and Case Management Conference (CCMC). We would always recommend that the Precedent H is filed with the Directions Questionnaire to avoid the likelihood of any default arising.
How do I Prepare a Precedent H Costs Budget?
What Happens if I Don’t File a Costs Budget?
If you do not file a Costs Budget, you will be limited to recovering Court fees only. You can make an application for Relief from Sanctions however; this must be done urgently on realisation of any default, or in the event any party raises an issue.
Can a Precedent H be Amended?
A Precedent H can be amended. You must serve the amended budget on the other side to be agreed. If a Costs Management Order has not yet been made, then parties will simply engage in discussions on the updated Budget, or the Budget will be set at the Costs Case Management Conference. If a Costs Management Order has been made, an application should be made to the Court for a revised budget if the other side do not agree with the amended Costs Budget.
Can I Deviate from a Costs Budget?
If you have not updated your Precedent H Budget before the end of the case, it is possible that there will be be a considerable discrepancy between incurred costs shown in the Bill of Costs and the Costs Budget. This can be due to the passage of time that has passed between the Cost Budget preparation and any CCMC.
If your Budget is insufficient on conclusion, you will need to demonstrate a ‘good reason’ retrospectively to deviate from the Budget. But what exactly is a good reason to deviate from the costs budget? This is quite an ambiguous issue and usually a high threshold to overcome. In order to be successful in deviating from the Precedent H, you must demonstrate the following:
- When the Budget was prepared, the change in circumstances could not have been foreseen.
- Any efforts which have been made to amend the Cost Budget following the change in circumstances.
How can we Help?
The Legal Practice Support team are always happy to help with any budgeting issues, and the author can be contacted via email at email@example.com. If you would like to find out more about best practice in preparing your cost budget, please feel free to view the section on our website for further guidance.
Our Costs Director, Robert Collington, can be contacted via email on firstname.lastname@example.org or by telephone on 01204 397302. You can also get in touch with us via the Contact Page on our website.
The 104th Update of the CPR changed the wording of Practice Direction 51X and has brought about a two year pilot scheme from 1st April 2019 for a new style N260 Statement of costs . In the new style statement of costs, there are two new versions, the N260(a) and the N260(b). The use of the new style statement of costs is not mandatory during the two-year pilot scheme however, use of the new formats will become compulsory after 31st March 2021 if the pilot is successful.
What are the Differences Between Forms N260 A and N260 B?
The key difference between N260 A and B is that, the former is a version which should be used on interim applications in summary assessments of costs. N260 B is for use at Trial. Both forms follow a similar format to a traditional form of paper bill.
Form N260 A is used to include information on hourly rates for items such as:
- time spent/attendances on the client
- the opponent
- “others” such as travel, documents and The Court
Form N260 B is similar; however, the profit costs should now be separated into the various phases of a Cost Budget. These phases include:
- Pre-action work
- Issue/Statements of Case
- Case Management Conference
- Witness Statements
- Expert Reports
- Trial Preparation
- Alternative Dispute Resolution
Counsels fees and other disbursements are also categorised. There is also a documents schedule which shows activity time as well as the dates when work was undertaken.
How are the New Forms Different from the Original Form N260?
The new N260 forms can be used in paper or electronic format however, if the electronic format is used, a paper copy must also be filed and served. Under paragraph 5 of Practice Direction 51X, the documents schedule can be:
“… created from electronic time records by filtering the time that is recovered under the activity described in Schedule 2 to PD 47 as”10-Plan, Prepare, Draft, Review”. This may then be sorted and presented first by grade of fee earner and then chronologically.”
There is also a prerequisite when using Form N260 B, that a Precedent Q form must also be filed and served simultaneously. A Precedent Q Form provides the breakdown of costs claimed in each phase of the proceedings.
Could the New N260 Forms Prove Problematic?
The main issue that solicitors may face when using the new N260 forms is that they may take a considerably more time to complete than the original N260, even if the firm’s time recording system allows parts of the new forms to be created from electronic time records. The costs incurred in completing the form can however, be recovered inter-partes if the interim application or trial is successful. It is therefore extremely beneficial to instruct your Costs Draftsman to prepare the new form N260, to ensure the maximum recovery of your costs, and also to ensure that the document is ultimately aligned with any Bill of Costs subsequently produced for assessment.
Can Legal Practice Support Help?
If you would like to find out more about best practice in preparing your Bills of Costs, we would invite readers to view this section on our website for further guidance. The Legal Practice Support team are always happy to help with any budgeting issues, and the author can be contacted via email at email@example.com
Our Costs Director, Robert Collington, can be contacted via email on firstname.lastname@example.org or by telephone on 01204 397302.
In addition, if you would like any information on how your Proclaim system can be developed to assist with the new electronic bill of costs, get in touch with our Head Proclaim Developer, James Denby, via e-mail on email@example.com
You can also get in touch with us via the Contact Page on our website.