Harmans Costs Brief - November 2015

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December is nearly upon us already, where has the year gone? 2015 has been a great year for Harmans, the highlight being receiving a shortlisting for a Law Society Excellence Award - our free app Costs Expert was recognised in the Business Development category, download it now and see what all the fuss is about!

We hope you've enjoyed Costs Brief this year and found it useful, we'll be back in 2016 with the latest industry news and developments.

Many thanks, Harmans Costs

For even more news and comment visit our website

The application of the "new" proportionality test
on an assessment of costs


It has been some time since the "new" test for proportionality was introduced for work undertaken post 1 April 2013 with CPR 44.3(2) stating:

"Where the amount of costs is to be assessed on the standard basis...Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred..."

The statement that proportionality trumped necessity was a difficult concept for many, if not all, claimant solicitors to accept and early judicial guidance was anticipated, as surely the purpose of a detailed assessment was to consider each disputed item and decide if the work undertaken was reasonable and if reasonable necessary to advance the claim; the "new" approach was interpreted to give rise to occasions whereby at the conclusion of a lengthy assessment of costs the Costs Judge would consider the sum allowed and if the resultant figure "appeared" disproportionate to the Costs Judge a further sum could be "chopped off".

How the further perceived penalty would be applied was a source of much debate...percentage of the bill? If yes, how was the percentage reduction to be calculated?

By reason of the application of the test being applied to work undertaken post 1 April 2013 only where proceedings were issued pre 1 April 2013* resulting in bills apportioned to show pre/post April 2013 the early anticipated guidance failed to materialise until very recently when Costs Judge O’Hare grasped the nettle in the matter of Mrs Mavis Ann Hobbs and Guy’s and St Thomas’ NHS Trust.

By way of brief background the Claimant sought damages for injuries suffered arising from clinical negligence on the part of the Defendant trust.

Read the rest of Gary Knight's comprehensive commentary following the decision of Master O'Hare. You can also read a Commercial Court Judge's guidance on the approach to proportionality below.

Test of Proportionality - a Commercial Court Judge's view

Kazakhstan Kagazy PLC v Zhunus [2015] EWHC 404 (Comm)

Mr Justice Leggatt gave guidance on the approach to proportionality which should be taken in hard fought litigation, with neither side showing any sense of moderation, and where the sums in issue exceeded many millions of pounds.

“[13] In a case such as this where very large amounts of money are at stake, it may be entirely reasonable from the point of view of a party incurring costs to spare no expense that might possibly help to influence the result of the proceedings. It does not follow, however, that such expense should be regarded as reasonably or proportionately incurred or reasonable and proportionate in amount when it comes to determining what costs are recoverable from the other party. What is reasonable and proportionate in that context must be judged objectively. The touchstone is not the amount of costs which it was in a party’s best interests to incur but the lowest amount which it could reasonably have been expected to spend in order to have its case conducted and presented proficiently, having regard to all the relevant circumstances. Expenditure over and above this level should be for a party’s own account and not recoverable from the other party. This approach is first of all fair. It is fair to distinguish between, on the one hand, costs which are reasonably attributable to the other party’s conduct in bringing or contesting the proceeding or otherwise causing costs to be incurred and, on the other hand, costs which are attributable to a party’s own choice about how best to advance its interests. There are also good policy reasons for drawing this distinction, which include discouraging waste and seeking to deter the escalation of costs for the overall benefit for litigants.”


The Harmans Aylesbury team moved to fresh new offices this month

Gemma Purser v Robert Hibbs & Anor [2015] EWHC 1792 (QB)

Consideration of the wording between "old" and "new" Part 36 requirements
when offer accepted out of time


Before Judge Moloney QC sitting as a Judge of the High Court the Defendant had made an application within a personal injury action pursuant to the former Part 36 Rule 10(5) to deal with the late acceptance of a Part 36 offer.

The case was a road traffic accident which took place on 13 November 2010 wherein liability was admitted and expert evidence assembled well before proceedings were actually commenced; surveillance was undertaken by the Defendant insurers over two periods pre-commencement (June 2012 and January/February 2013) the evidence disclosed nothing suspicious or discreditable.

The Defendant made a Part 36 offer in the sum of £95,000.00 on 23 July 2013 which was not accepted within the relevant period though the offer remained open for acceptance and was accepted at the end of 2014.

Proceedings had been issued November 2013 with a Defence served in April 2014; immediately thereafter the Defendant’s insurers directed a third period of surveillance which took place between April – June 2014. The evidence revealed the Claimant to be, in the words of Moloney J, "a person of full physical ability".

The Claimant sought an interim payment on account and at this stage 24 October 2014, the Defendant decided to disclose the surveillance evidence and within a fortnight of disclosure the Claimant accepted the Part 36 offer.

Find out what happened next and the final outcome.


Court of Protection to pilot default position of holding hearings in public

The Court of Protection could switch to a default position of holding hearings in public if a six-month pilot scheme to be held in all regions in England and Wales next year is considered a success, senior judges have said.

A practice direction made under rule 9A of the Court of Protection Rules 2007 ("CoPR") provides for a pilot scheme for the holding of hearings to be in public pursuant to orders under Rule 92 with a standard order for restrictions on reporting to ensure the anonymity of those lacking apacity and, where appropriate, other persons

Read more

Allegations of fraud - imdemnity basis costs

Ch D (David Richards J) 02/10/2015

A Defendant was awarded costs on the Indemnity basis where the Claimant issued a Notice of Discontinuance the day before the Defendants Application to strike out its claim was due to be heard. The Claimant had also failed more than once to provide a satisfactory draft of its proposed amended Particulars of Claim, which contained allegations of fraud.

As a result, the Eleventh Defendant (D11) applied for its costs on the Indemnity basis.


Read more
Lexis PSL Dispute Resolution Practice Note - costs sanctions for refusal to mediate

Security for costs - the appropriate test to apply

The appropriate test to apply when deciding whether to make an order for security for costs under CPR r.25.13(2)(a) is whether it was "likely" that there would be obstacles or burdens of enforcement in the foreign jurisdiction, and not whether there was a "real risk" of such obstacles or burdens arising.
The Defendants appealed against a refusal of their application for security for costs against the Claimants.
The Defendants had sought security for costs under CPR r.25.13(2)(a) on the basis that the Claimant companies were resident in Georgia and so not resident in the jurisdiction or in a state falling within  CPR r.25.13(2)(a)(ii). In refusing the application, the Master relied on  Nasser v United Bank of Kuwait [2001] EWCA Civ 1454 and  Dumrul v Standard Chartered Bank [2010] EWHC 2625 (Comm), [2010] 2 C.L.C. 661 to hold that he was not satisfied that there were likely to be obstacles to or burdens of enforcement in Georgia as compared with enforcement in a state falling within CPR r.25.13(2)(a)(ii).
The Defendants submitted, in reliance on De Beer v Kanaar & Co (No.1) [2001] EWCA Civ 1318, [2003] 1 W.L.R. 38, that the Master had applied too high a test in considering whether there were "likely" to be any difficulties in enforcement, and that the appropriate test was whether there was a "real risk" of such difficulties arising. They contended that the cases of  Texuna International Ltd v Cairn Energy Plc [2004] EWHC 1102 (Comm), [2005] 1 B.C.L.C. 579 and  AIMS Asset Management v Kazakhstan Investment Fund Ltd  supported their suggestion that the test was not one of likelihood but one of real risk.
(1) Reading the judgment of Nasser as a whole, it was clear that the Court had considered whether obstacles or burdens to enforcement were likely to arise rather than whether there was a real risk of them arising, Nasser considered. The cases relied on by the Defendants had not specifically considered the correct test to be applied, De Beer, Texuna and AIMS Asset Management considered. However, the issue of the correct threshold had been specifically considered in Dumrul, and it had been held that an applicant had to show that an obstacle or burden was likely. The fact that De Beer had not been cited in Dumrul did not affect the correctness of the approach taken in Dumrul. It was appropriate to apply the reasoning in Dumrul, particularly since it had been subsequently approved and applied by the Court of Appeal in  Star Reefers Pool Inc v JFC Group (Security for Costs) [2011] EWCA Civ 1065, Dumrul and Nasser applied, Star Reefers and  Allen v Bloomsbury Publishing Plc [2011] EWCA Civ 943 considered. On that basis, the Master had not applied the wrong test.
(2) The Master had not failed to take into account relevant matters or taken into account irrelevant matters. He had been entitled to take the approach he did and there was no basis for interfering with his decision.
As a result the Appeal was dismissed.


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