Harmans Costs Brief - March 2015

Welcome to the latest edition of Costs Brief.  Over the last few weeks industry news has been dominated by the civil courts fees increase - you can read our coverage of the situation below.  In rather more positive news our latest costs seminar was fully booked in record time - there is now a waiting list in operation so if you missed out and would like alerts for future seminars - see below! 

As usual, we aim to bring you all the latest news and developments in Costs along with expert analysis, we hope you enjoy the latest issue of Costs Brief.
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What price Justice?  Court fee changes under fire

The government has pressed ahead with higher charges for civil court proceedings to recover money owed, which solicitors’ leaders warn could price the public out of the courts.

The Ministry of Justice, which published its response to a consultation on proposed reforms to court fees on 16 January, have now increased the fee from 9th March 2015, to issue proceedings for the recovery of money to 5% of the value of the claim for all claims over £10,000. It said: “The fees for claims of less than £10,000, which represent over 90 per cent of all money claims, are unaffected by these changes and will remain at their current levels.”

The maximum fee to issue proceedings will be £10,000, the fee payable to issue a claim for £200,000. Typical cases include recovery of debt such as loans, utility bills and business debts owed under contract for goods or services delivered.

The consultation also put forward proposals for higher fees in commercial proceedings and to start divorce proceedings but the government decided against implementing those recommendations.

Plans went ahead to introduce the legislation necessary to implement the new fees before the start of the 2015-16 financial year and the changes were effective from 9th March 2015.

The increased fees have come under fire from organisations including the Civil Justice Council, an advisory body that oversees and is responsible for modernisation of the civil justice system. It said it was “extremely concerned” by a fee based on five per cent of the value of a claim.

It warned that this could effectively price many people out of the courts, adding that it could have a “disproportionately adverse effect on some groups e.g. small and medium enterprises, low income individuals and thereby undermining equality before the law.”

The Law Society also attacked the fee increase; President Andrew Caplen said: “We will be pressing the government to reverse its decision which will have a far-reaching impact.”

He said they would “spell disaster for access to justice, pricing the public out of the courts and leaving small businesses saddled with debts they are due but unable to afford to recover”.

An online petition to reverse the decision to increase Civil Court fees from Monday 9th March has been launched and is attracting a large number of signatures.

Whatever our views we can all agree that these increases harm individuals and businesses by denying access to justice.

You can sign the petition here.

Payments on account - Nishma Shah considers how much is just right? 

In Webster v Ridgeway School [2010] EWHC 318 the Court stated that ‘Where a litigant has a costs order in his favour there may well be some inevitable delay while the precise amount to which he is entitled is ascertained by a detailed assessment. Yet if he is bound to receive a certain part of those costs there is no justification in making him wait even for that part.’

Therefore, to deal with this issue, under CPR 44.2 (8), the Court is able to order a party to pay costs subject to a detailed assessment; it will order that party to pay a reasonable sum on account of costs, unless there is good reason not to do so.

The purpose of a payment on account is to reimburse the Receiving Party for bills previously rendered. This is of particular important where there have been lengthy proceedings.

In Mars UK Ltd v Teknowledge Ltd [2008] EWHC 226 (Pat), the Court considered the merits of ordering a payment on account of costs following a trial. It found that the Court should normally order an amount to be paid on account to the Receiving Party. Although this would be on a rough and ready basis, it would mean that the Judge would have to form a view, albeit a rough view, as to the ultimate amount of assessed costs in order to ascertain the level of payment that should be made.

In this case, based on various facts, the Court ordered that the Claimant was awarded two thirds of the costs that the Court considered were likely to be recovered on assessment, payable on an installment basis.

The Court does take a dim view of parties which unreasonably refuse to make a payment on account.

For example in the case of Soliman v Islington Borough Council, the Claimant settled the claim for £50,000.00 plus costs to be assessed if not agreed. The Claimant had asked for a payment on account. The Defendant after requesting details as to the amount of costs claimed failed to acknowledge that a payment on account was appropriate. As the trial date had not been vacated, the parties attended Court. The Judge awarded a payment on account and the Claimant was awarded costs on the standard basis for the hearing.

It is always beneficial for the Paying Party not to oppose a reasonable request for a payment on account. It also benefits the Paying Party by lowering the amount of interest payable.

For the Receiving Party it is always important to request a reasonable sum. Remember that on assessment, costs claimed typically are reduced by 15-25%.

So what is a reasonable sum to request?
In Hurndell v Hozier [2011] EWHC 321 (Ch) Justice Morgan indicated that where costs were assessed on the indemnity basis 60% of the costs as claimed should be paid. The Court was assisted by a detailed breakdown of the way the costs had been incurred.

Where costs are to be assessed on the standard basis a successful party should expect to receive about 50-60% of the costs claimed in the Bill. In Fitzroy Robins v Mentmore Towers [2010] EWHC 98 Justice Coulson awarded the Receiving Party 50% of the Bill as claimed.

The cases of Scullion v Bank of Scotland [2010] EWCH 2253 and Oakhurst Property Developments (Lowndes Square No.2) Limited v Blackstar (Isle of Man) Limited [2012] EWHC 1131 Ch reinforce the principle that the Receiving Party should expect approximately 50% as a payment on account from the Bill as drawn.

As a Paying Party, it would be prudent to make an interim payment for 60% of the Bill (where the Receiving Party has obtained indemnity costs) or 50% of the Bill (where costs are to be assessed on the standard basis) with a view to avoiding a significant liability for interest at the conclusion of the assessment process.

Don't forget you can use the interest calculator on our free app Costs Expert to input various data such as date of order, amount of offer, costs to date and any payments on account to calculate totals inclusive and exclusive of interest.

iPhone version: 
Android version:

Online Dispute Resolution (ODR) – the shape of things to come?

The CJC’s Advisory Group on ODR published its report in February 2015.

Via the link you can find the report itself, as well as some background information on its development.

Additionally, there are links to interviews with experts in the field of ODR, discussing its history, current application and potential future in helping people resolve their problems in civil law.

Insurance and Child Abuse

With a growing number of compensation claims arising from cases of historic sexual abuse and more recent high profile cases of sexual grooming, Tim Whewell investigates the key role which insurance companies play. In representing the local authorities where scandals occurred, insurers naturally seek to limit liability but are they doing so at a cost to victims?

Lawyers say they have to battle to get access to files and other information - causing further distress and delaying help for those damaged by abuse. Some say the fight is getting harder as insurance companies have toughened their approach in recent years. And, with a national inquiry into historic cases of child sex abuse, how much influence did insurance companies have on the way some past investigations were carried out?

File on 4 talks to senior local authority insiders who say they were told to alter their approach to abuse investigations to protect the insurers' interests. But was that at the expense of children at risk? Click on the following link to listen to this 38 min report: BBC Radio 4's File on Four
At our next costs breakfast seminar on Friday 10 April 2015 at The Law Society in London we are delighted to be joined by Roger Mallalieu, Barrister from 4 New Square. Our Senior Partner Matthew Harman will provide a budget update followed by Roger who will give a case law update.

We are holding two sessions: 9.15-10.30am and 10.45am-12.00pm - unfortunately both sessions are now fully booked and a waiting list is in operation.  Each session carries 1 CPD point.

Our seminars are free and open to all clients but are limited to 35 attendees per session. Our latest seminar was fully booked in record time, if you missed out this time then make sure you sign up for future alerts - register your interest for this and future Harmans costs seminars by emailing


Follow us on Twitter @HarmansCosts for the latest industry comment.  We also hold regular Q&A sessions when you can tweet or DM our legal costs experts a question - look out for details of our next one coming soon.
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