Anyone working in the costs world, where your client is a receiving party, will no doubt understand one of the core considerations in all cases. What is an appropriate amount to have on account of your bill? We have had a number of judgments in recent times which have given guidance on this point. Mars UK v Teknowledge Ltd has been widely used to secure payments of two thirds of receiving parties’ costs.
However, just when we thought everyone was reading from the same script, we now have further guidance in the recent cases of I v Hull & East Yorkshire Hospitals NHS Trust and RXK v Hampshire Hospitals NHS Foundation Trust.
The guidance in both cases relates to lengthy litigation and receiving parties applying for quantum costs before that aspect has been resolved. Essentially, the usual costs order is for an opponent to pay costs associated with establishing liability and perhaps an interim payment towards those costs. A costs order which went further than this and included payment of quantum costs at an interim stage was relatively unheard of, although it was considered in some group action cases, such as Giambrone v JMC Holidays Ltd.
I is for interim
The above will have no doubt been one of the considerations of Batchelor DJ when the case of I v Hull & East Yorkshire Hospitals NHS Trust came before her back in February 2019 in Sheffield County Court. In that case, settlement for liability in a clinical negligence matter stemming from a birth injury which had left the claimant catastrophically injured, had been approved back in December 2012. As liability had been resolved, costs to date were ordered and the defendant made payments in the sum of £215,000. However, the claimant made a further application for £150,000. The defendant argued the claimants were not entitled to this further sum, as it would effectively allow the claimant quantum costs before that element of the case had been resolved. Batchelor DJ dismissed the application, stating that ordering those costs would be “putting the cart before the horse.”
To the majority, this would seem an uncontroversial judgment. However, the claimant appealed the decision, with two main issues in mind:
- Whether the court had the power to make an order for payment of quantum costs before determination.
- If so, whether the court had the power to order such a payment?
HHJ Robinson found that CPR 44.2(1) and (2) were wide enough to allow the court to make an order for costs. Again, this is not hugely controversial as the rules are relatively clear. However, what was of more interest were the factors the judge considered when allowing the claimant’s appeal.
Three areas were considered:
- £1.2 million had been paid on account of damages.
- It was certain that the claimant would recover more at trial or by settlement.
- There was no Part 36 offer from the defendant.
On this basis, the judge decided that it was virtually certain that the claimant would be entitled to its costs to date. He went on to say that Batchelor DJ’s use of discretion in relation to the rules had been “flawed”, and also that:
“Failure to ensure adequate cash flow during the period of inevitable delay may lead to the perverse and undesirable consequence that solicitors are unwilling to take on cases such as this at an early stage. It is in everyone’s interests to determine liability as early as possible. But if the consequence is that solicitors must then fund the quantum investigation for 10 years or more, they may not be anxious to take the case on early.”
The judge order £150,000 to be paid on account of the claimant’s costs. Subsequently, permission to appeal was refused by Irwin LJ.
RXK: affirming I
In hot pursuit was the case of RXK v Hampshire Hospitals NHS Foundation Trust. Heard in October 2019, the matter proceeded on both applications for damages and costs. As in I, the matter centred around a long running, hard fought, clinical negligence matter. The claimant sought an interim payment on quantum costs when the only order for costs related to liability.
Master Cook considered CPR 44.2(1) and 44.2(2) and was in full agreement with HHJ Robinson regarding the interpretation of the rules. He stated:
“… as Irwin LJ commented when refusing permission to appeal the meaning of ‘successful party’ or ‘unsuccessful party’ cannot be confined to a binary outcome of the whole case. But it in my view is important to realise that what HHJ Robinson actually did when allowing the appeal of DJ Batchelor was to make a costs order down to the date of the hearing of the application for an interim payment on account before the District Judge… This must be right as the wording of CPR 44.2(8) provides that the court will make an interim payment on account of costs only where it has made a costs order which could be subject to detailed assessment.”
He found that the application before him mirrored the circumstances outlined above and set out some considerations that need to be taken into account when looking at applications in this vein:
- The type of funding agreement and any payments made under that agreement.
- Whether any Part 36 offer has been made.
- Details of payments on account of damages.
- A realistic valuation of the likely damages to be awarded at trial.
- A realistic estimate of quantum costs incurred to the date of the application.
- Any other relevant factors that will have an impact on final costs, such as an issue based costs order, rate points or conduct.
- Likely date of trial or trial window.
Master Cook made it clear that the need for a solicitor’s cash flow in protracted cases is now “well understood and enshrined in the rules”. However, due to the need for further information in line with the considerations outlined above, this matter was set to be relisted before the defendant agreed to make the interim payment.
With I and RXK, we now have clear guidance from the judiciary on the issue of interim payments covering quantum costs at an interim stage in the case. The ability to obtain such an order will depend very much on the facts, and such orders will only apply to a small number of cases that clearly fit the criteria as outlined by Master Cook and by HHJ Robinson. However, those firms acting for receiving parties will no doubt welcome that the law on this topic has been clarified and that such orders for interim payments of costs are at least possible in the right situation.