REUTERS | Tobias Schwarz

Costs round-up March 2019

Can amendment amount to discontinuance?

In Galazi and another v Christoforou and others, the Chancery Master considered whether the very substantial amendments made to the particulars of claim amounted to a discontinuance of the whole or part of the claim, triggering the default position under CPR 38.6(1) that the discontinuing party is liable to pay the costs of the other party.

The master held that abandoning one remedy, where there remained other remedies, did not of itself amount to discontinuance, but the abandonment of an entire cause of action may amount to a partial discontinuance.

Here, the master held that the claimants had discontinued the entire claims against two defendants, thus triggering CPR 38.6(1), and in relation to those matters, assessment of costs could take place immediately. There was no reason to depart from the default position; it had been their choice to bring the claim in the form it took, which was wrong, and there was no unreasonable conduct on the part of the defendants in relation to the discontinuance.

Delaying assessment would involve extra costs. Against other defendants, they had partly discontinued and the court allowed immediate assessment on costs. As to the costs of and occasioned by the amendments not amounting to discontinuance, the court ordered the claimant to pay these. All such costs, whether occasioned by discontinuance or amendments not amounting to discontinuance, were to be paid on the indemnity basis as the claimants’ conduct was outside the norm.

Who is the real winner?

In Hamad M Aldrees & Partners v Rotex Europe Ltd, the Technology and Construction Court revisited the issue of who had truly won the case in circumstances where the claimant was awarded 2% of the amount claimed. The classic theory is that he or she who writes the cheque is the loser. Here, the court ordered the unsuccessful defendant to pay 20% of the claimant’s costs.

Such cases will almost always be fact sensitive, but this lengthy judgment contains a full, detailed and helpful examination of the recent authorities on this issue.

No protective costs order in private claim

In Maugham v Uber London Ltd, the High Court refused the claimant’s application for a protective costs order limiting his costs to £20,000.

Here, the claimant was seeking a declaration that the defendant provide a VAT invoice in relation to its alleged supply of transport services in the form of private hire vehicles. The defendant said that it was an intermediary and did not provide transport services, and therefore it was not liable to invoice for VAT. The claimant believed that HMRC was failing to take action in respect of Uber’s alleged liability for output tax, and that therefore there was a public interest in the case in ensuring that any liability was collected, and generally in the fair administration of the VAT scheme.

Protective costs orders are generally only made in public law claims, particularly in judicial review proceedings. Here, the High Court held that this was private litigation in which a protective costs order could not be made and that the wider public interest in the tax issues did not justify changing that position. The High Court said it was bound by the decision in Eweida v British Airways Plc, which held that a protective costs order could not be made in private litigation.

The High Court said that if it was wrong about its interpretation of Eweida, it would not be just or fair to make a protective costs order in this case in any event. A properly formulated public law challenge by judicial review was the proper way of reviewing HMRC’s conduct in not exercising its VAT powers. That would then engage the possibility of a costs capping order.

The general principles governing protective costs orders were set out by the Court of Appeal in R (on the application of Corner House Research) v Secretary of State for Trade and Industry.

Costs permitted to be claimed as damages

In Playboy Club London Ltd v Banca Nazionale Del Lavora SPA, the Commercial Court allowed an amendment to particulars of claim in deceit proceedings to include, as a head of damages, adverse costs incurred in respect of the defendant in these proceedings, that is, the other party in the original proceedings.

Both the original proceedings, and the current ones, related to a credit reference relied upon by the claimant, the owner of a casino, and the original negligence claim succeeded in the High Court. However, the Court of Appeal overturned that decision. That finding of the Court of Appeal was upheld by the Supreme Court; thus, the defendant won the claim and the claimant was ordered to pay the costs of the defendant. The claimant then brought the current deceit proceedings and the defendant’s attempt to strike them out failed.

The proposed amendments in these proceedings pleaded that, although the claimant’s negligence claim had ultimately failed, it had at all relevant times at least a reasonable prospect of success, and that the claimant had acted reasonably in bringing and pursuing the claim and that the costs incurred formed part of the total costs exposure recoverable in the deceit claim.

The court recognised that damages are recoverable to a greater extent in a case of fraud, as compared with a claim in negligence. It also found that the claimant had a more than merely fanciful prospect of success, and therefore it would be wrong to decide the question without a trial.

The defendant argued that, as a matter of principle, costs could not be recoverable as damages. There was no authority involving costs of a previous legal action between the same parties, and where the claimant had been unsuccessful and had had costs awarded against it, being awarded damages in a subsequent legal action, to include those costs. The defendant pointed out that the effect of this was to reverse the costs award previously made.

The court considered that, although this was a novel and unprecedented claim which might be difficult to establish, the principle should not be determined without findings on all of the disputes of fact. The matter should be decided at trial, and not by refusing permission to amend the pleadings, which would mean that the matter could not be argued at all.

Fixed costs in virtually all claims valued at £100,000 or less

The government has announced a consultation on Jackson LJ’s (as he then was) July 2017 Review of Civil Litigation Costs: Supplemental Report – Fixed Recoverable Costs. It runs until 6 June 2019.

The government intends to implement the report as drafted, with the exception of the new track being referred to as the extended fast track rather than the intermediate track.

The proposed figures for fixed recoverable costs are exactly as in the report. LJ Jackson said that the Part 36 uplift on costs should be either 30% or 40%. In an unsurprising move, the government has proposed a fixed uplift of 35%. The proposals are expected to be implemented on Monday, 6 April 2020.

Clinical negligence claims and claims in the Business and Property Courts are not included in the scheme.

Pilot for summary assessment

On 1 April 2019, a voluntary pilot scheme for a new statement of costs for summary assessment came in and will last for two years. It is dealt with in new Practice Direction 51X and two new forms: N260A and N260B accompany the pilots.

New budget discussion report

On 25 April 2019, a new Precedent R (Budget Discussion Report) replaces the existing Precedent R annexed to Practice Direction 3E.

Success fee recoverability scrapped in defamation and breach of privacy cases

Recoverability of success fees, but significantly not recoverability of after-the-event (ATE) insurance premiums, is to be scrapped in relation to new defamation and privacy claims, that is claims from 6 April 2019 onwards.

I presume that it will relate to any conditional fee agreement (CFA) entered into on or after 6 April 2019.

The type of claims covered are:

However, this in each case only where the defendant is a news publisher, that is a person who publishes a newspaper, magazine or website containing news or information about or comment on current affairs.

Generally, recoverability of both success fees and ATE premiums was abolished in relation to arrangements entered into on or after 1 April 2013, by virtue of section 44 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012.

There were limited exceptions. The only ones that now remain are in relation to mesothelioma proceedings, where both the success fee and the ATE premium remain fully recoverable, and in clinical negligence proceedings where the success fee is not recoverable, but the ATE insurance premium is, but only to a limited extent. In many ways, the significance is not the abolition of recovery of the success fee, which was only ever a matter of time, but rather the decision to maintain the recoverability of the ATE premium.

Outside the field of personal injury, where qualified one-way costs shifting (QOCS) restricts the need for such insurance, this has been a key issue in relation to access to justice. The system of CFAs may mean that claimants can afford to pay their own lawyers, but if a losing client remains liable for the other side’s costs, which it does outside the QOCS protected field of personal injury, then access to justice is an illusion.

True it is that a claimant can seek to take out ATE insurance, but the premium is then deducted from the damages if the claimant wins. The winning claimant is almost certainly to be paying an unrecoverable success fee to its own solicitors in such cases as well. As such schemes generally provide for no premium to be paid in a lost case, where the insurer has to pay out, a winning claimant is effectively paying for those premiums as well, which partly explains the high cost of ATE insurance. Allowing recoverability of the ATE premium, but not the success fee, solves this problem and is a potential model for other types of cases. Such insurance would generally cover the claimant’s own disbursements as well.

Whether it is just for a losing defendant to have to pay for the claimant to bring a claim against it is another matter. Recoverability of success fees and ATEinsurance premiums was generally seen as involving identical considerations. I always disagreed with that view, and while I always thought that recoverability of success fees was wrong, I took a different view about the recoverability of ATE premiums. I refer above to it being potentially unjust for a defendant to finance the action against it, but ATE insurance at least gives a successful defendant a fund out of which it can enforce its costs order and generally defendants may prefer such a scheme, that is recoverable ATE insurance, to QOCS.


General civil litigation, including personal injury cases

The success fee remains recoverable only where the CFA was entered into on or before 31 March 2013.


The success fee remains recoverable only in relation to any CFA entered into on or before 5 April 2016.

Defamation and privacy

The success fee remains recoverable, but only in relation to CFAs entered into on or before 5 April 2019.

Mesothelioma claims

The success fee remains recoverable in all mesothelioma claims and there is no proposal to alter that position.

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