Reeling in the year

With 2018 drawing to a close, it’s time again to look back at the key decisions which made the headlines this year in the world of costs.

Significantly Sharper?
Although technically a December 2017 decision, the effect of Sharp v Blank & Ors [2017] EWHC 3390 became felt in 2018. Here Chief Master Marsh provided some much-needed and logical guidance on what would constitute a significant development in order to justify a revision to a budget. Some of the key points to emerge from this lengthy judgment are:

  • There is a duty on the parties to revise their budgets when there has been a significant development. This application should be made promptly.
  • Although the costs of an interim application falls (typically) outside the budget, the consequences that flow from the application may be a significant development.
  • Costs incurred since the date of the last approved budget which related to significant developments are, for the purposes of the revision, estimated costs.

Additional headache
Until the decision of Lord Justice Hickinbottom, in Springer v University Hospitals of Leicester NHS Trust [2018] EWCA Civ 436, there was a widely held view that notification of an additional liability within the Letter of Claim was sufficient to comply with the rules. Springer turns that assumption on its head. It now transpires that a failure to notify within 7 days of entering into a CFA, or taking out an ATEI policy, will trigger the automatic sanctions under CPR rule 44.3(B)1 (of the old rules on notification of additional liabilities).

Proportionality relaxed?
The wait for a Court of Appeal decision on the ‘new’ proportionality test has entered a sixth year, but we did have a glimpse into the task which lies ahead. An appeal of the decision of Master Rowley in May -v- Wavell Group Ltd was dealt with by HHJ Dight CBE in the Central London County Court. Although heralded by some as a relaxation of proportionality, in reality there is nothing significant to take from this judgment, other than when looking for the elusive proportionate figure, different weights must be afforded to the different factors under CPR 44.3 (5) while a Costs Judge’s discretion remains a significant factor in every decision.

Delivery failed
2017 and 2018 saw a plethora of rulings in the SCCO dealing with the delivery up of papers in disputes between solicitors and clients. Ultimately this led to the ruling of Mr Justice Soole in Hanley v J C & A Solicitors [2018] EWHC 2592 (QB), where it was decided that the court did not have the inherent power to compel solicitors to hand over copies of documents to their former clients. However, there was a note of caution to solicitors who refuse reasonable requests for papers, as the refusal “could have potential adverse costs implications for the solicitors within those proceedings”.

Practical accounting
At the conclusion of protracted, heavy litigation, realistic payments on account of costs pending detailed assessment are welcome and encourage settlement of costs disputes. With that in mind, 2018 threw up some useful case law. In the matter of Cleveland Bridge UK Ltd v Sarens (UK) Ltd [2018] EWHC 827 (TCC), when considering the ‘reasonable sum’ for a costs-managed matter, the court followed the decision of Coulson J (as he then was) in MacInnes v Gross [2017] EWHC 127 (QB) to allow 90% of the estimated costs, while the incurred costs, being of a different species, fell outside this 90% figure and fell to be considered separately and by reference to the usual factors (estimated recovery on detailed assessment less appropriate discount for error).
The calculation of the ‘reasonable sum’ proved more difficult in the matter of Dana Gas PJSC v Dana Gas Sukuk Ltd & Ors [2018] EWHC 332 (Comm), as in that matter “the amount of costs claimed is so obviously unsustainable”. Some of the key criticisms, which led to a significant reduction to the amount sought were:

  • Grade hourly rates (£700 - £946) were double the going rate for similarly complex commercial litigation;
  • Disproportionate use of senior fee earners;
  • Failure to justify the amount of time claimed;
  • Scant detail provided by the statement of costs

Third party dangers
The Court of Appeal recently dealt with the thorny issue of granting a non-party costs order in the matter of Sony/ATV Music Publishing LLC v WPMC Ltd (in liquidation) [2018] EWCA Civ 2005. Arising from this decision two key features have emerged:

  • Failure to warn will be a material factor (in some but not all cases) when considering whether a non-party costs order is appropriate
  • The Arkin Cap (i.e. the principle which limits the costs liability to the amount funded) does not apply when the funder is the “real party” and “not so much facilitating access to justice by the party funded as himself gaining access to justice for his own purposes”

Security delays
Wrapping up our summary is the matter of Accident Exchange and another v McLean & Others [2018] EWHC 1533 (Comm) which dealt with the issue of delay in applying for Security for Costs. Teare J accepted the argument that there should be a consequence to the 15 month delay in applying for security. , In respect of the incurred costs, he allowed 36% of reported costs and the usual 60% of costs yet to be incurred.

Looking forward to 2019
Although it came somewhat out of the blue it will be interesting to see what effect the removal of recoverable success fees in publication cases. It may increase the appetite of the media to defend defamation and privacy cases and affect the ability of claimant firms to fund cases after April.

The appeal in Merricks v Mastercard is due to be heard in February and is bound to shape the future of ‘opt out’ class actions under the Consumer Rights Act.

Whenever there is a significant costs decision we will continue to do our best to flag up the implications for practitioners.