ARTICLE BY DAVID COOPER, COUNCIL MEMBER OF THE ASSOCIATION OF COSTS LAWYERS AND A PARTNER AT TAYLOR ROSE TTKW SOLICITORS
Who is the loser where detailed assessment costs are capped – the solicitor or client?
Whilst the dust may be settling following the decision of the Court of Appeal in W Portsmouth and Company Ltd V Christine Linda Lowin [2017] EWCA Civ 2172, there is nevertheless a continuing need for parties and their lawyer to be vigilant in relation to costs, especially where a part 36 offer is in play.
It is regrettable that so much time and money has been expended and it has required the Court of Appeal to deliberate upon an issue which many in the profession considered to be clear and straightforward.
Having settled her case favourably, Ms Lowin made a part 36 offer of £32,000 in respect of her costs in March 2015. A month later, the detailed assessment process began with her claiming £55,086.
In December 2015, Master Whalan provisionally assessed her costs at £32,255. Having beaten the offer, he made the usual part 36 order.
Ms Lowin claimed £6,091 for the costs of the assessment proceedings. Master Whalan ordered the company to pay the costs on the indemnity basis, but then applied a cap pursuant to CPR 47.15(5). This led to a total of £2,805 – £1,500 in costs plus VAT and the £1,005 court fee.
Mrs Justice Laing reversed him on appeal, citing the Court of Appeal’s early 2016 ruling in Broadhurst v Tan. This decided that a party awarded indemnity costs after beating a part 36 offer in a case where fixed fees applied was eligible for indemnity costs as there was tension between the two concepts.
But on further appeal, Lady Justice Asplin approved Master Whalan’s approach. Broadhurst, she said, was not relevant – unlike with fixed costs, a cap did not prevent costs being assessed on the indemnity basis “or affect the quantum of the costs which are being assessed under that rule”, she said.
“It merely inhibits the amount which can be awarded, the assessment of the party’s costs having taken place on the indemnity basis as required by CPR rule 36.17(4)(b). If the party’s costs assessed on the indemnity basis were less than the cap, the full sum would be awarded…
“It follows that, with great respect, I do not consider that the judge was right to conclude… that there is a material conflict between costs assessed on the indemnity basis and costs assessed on that basis subject to a cap.”
There was nothing in the CPR to suggest that the cap should be disapplied, Asplin LJ said: “Such a construction is also consistent with the policy behind both CPR rule 47.15 and part 36. It does not undermine the intention to encourage the quick and cheap resolution of the assessment of costs in cases in which the costs claimed are £75,000 or below.
“Nor does it deprive the successful party of the not inconsiderable benefits in CPR rule 36.17(4)(a)-(d) albeit that the costs under (b) [indemnity costs] are subject to the cap.”
Part 36 is a self-contained code and the costs consequences are clearly spelt out. If the case does not include a claim where the fixed costs provisions apply, there is no other restriction in relation to costs.
It is immediately apparent from the rule that there is greater reward for a claimant beating a defendant’s offer rather than the other way round. Why this should be is another matter altogether if the purpose of the regime is to encourage early settlements. This anomaly has been raised on many occasions and the decision in Lowin again brings this to the fore.
Additionally, why should a successful defendant not be entitled to have his/her costs assessed on the indemnity basis? It is anticipated that the Civil Procedure Rule Committee will again be asked to address this issue when they next review the rules.
Either way, part 36 provides for either deemed orders to be made where an offer is accepted or for the court to issue an order for costs as part of a judgment. These are orders for costs and that means a party is entitled to recover costs and in the absence of agreement they will be subject to assessment.
But the rules for the assessment are set out in CPR 44-47 and in particular where the bill is to be subject to provisional assessment. CPR 47.15. provides: “In proceedings which do not go beyond provisional assessment, the maximum amount the court will award to any party as costs of the assessment (other than the costs of drafting the bill of costs) is £1,500 together with any VAT thereon and any court fees paid by that party.”
The phrase “maximum amount” indicates that this is a cap, not a fixed sum. So, if the actual costs incurred by the solicitor are less than £1,500, that sum could still be subject to reduction on a standard assessment, or up to the cap if on the indemnity basis. As Lady Justice Asplin pointed out in Lowin, by contrast fixed costs are awarded regardless of whether or not the amount of those fixed costs has actually been incurred.
The Court of Appeal’s ruling serves as a reminder to practitioners to ensure that the question of both liability for payment of the costs by the client and the extent to which those costs, or a proportion of those costs, may be recoverable at the end of the day is addressed from the beginning and regularly reviewed throughout the case.
David Cooper is a council member of the Association of Costs Lawyers and a partner at Taylor Rose TTKW Solicitors
This article was first published in Litigation Funding on 13 February 2018.