Mitchell we leave to Camilla Church, save for three recent cases in which it has been considered in the costs field. As yet, there has been no significant case law on QOCS, little on the new Part 36 regime or the new proportionality test, and no word on a reported review of the courts’ powers to manage pre-action costs – all are likely to loom large on the costs landscape in the foreseeable future.

PGF II SA v (1) OMFS Co (2) Bank of Scotland plc 39 has been described as the second most important civil case of 2013. The Court of Appeal looked again at the question of refusal to engage in mediation, see Halsey v Milton Keynes General NHS Trust 40. The defendant had made a part 36 offer which the claimant accepted out of time, and so the defendant sought its costs from the last date for acceptance. Although it had made a well- pitched part 36 offer, it had not responded at all to a detailed invitation to mediate. That invitation was repeated. At first instance the judge held that the failure to respond to the invitation to mediate was unreasonable and did not award the defendant its costs, though did not go so far as to award the claimant its costs for the same period. The Court of Appeal upheld these decisions. As a general rule, silence in the face of an invitation to participate in ADR was itself unreasonable, regardless of whether a refusal to engage in ADR might have been justified. It was possible, however, that there might be rare cases where ADR was so obviously inappropriate that to characterise silence as unreasonable would be pure formalism, or where the failure to respond was a result of a mistake, in which case the onus would be on the recipient of the invitation to make that explanation good. This decision bears careful reading.

Bank of Ireland v Philip Pank Partnership 41 provides a good example of a technical challenge on costs post- Mitchell being given robust treatment by the High Court. The claimant’s solicitor had filed and served a costs budget on time, but failed to notice on signing that, although the words ‘Statement of truth’ appeared next to his signature, the statement of truth itself was not present due to a formatting error. Stuart-Smith J rejected the defendant’s argument that this error rendered the budget a nullity and that therefore no budget had been filed, holding that it was a valid document which suffered only from an irregularity, which had subsequently been rectified. The sanction contained in rule 3.14 was therefore not applicable, and the case was far removed from those in which there had been a failure to file and serve a costs budget at all or within the prescribed period. Whilst a failure to sign a statement of truth could not be described as “trivial”, it was clear that the solicitor’s intention had been to sign the statement of truth, and that was what he thought he had done. It would, the Judge concluded, “serve only to bring the rules of procedure and the law generally into disrepute” if it were to be held that any failure to comply with Precedent H or PD 22 rendered a costs budget a nullity. Fortunately, he found, there was nothing  in  the  rules  or  practice  directions  which compelled the court to find that each and every failure to comply with the formal requirements for costs budgets rendered the non-compliant budget a nullity, as opposed to one subject to an irregularity (and therefore capable of remedy).

Whilst not a personal injury matter, (1) Forstater (2) Forstater Productions Ltd v (1) Python (Monty) Pictures Ltd (2) Freeway Cam (UK) Ltd 42 is another helpful case for parties in default in that it provides a (comparatively rare) example of a recent case in which relief from sanction was granted following failure to serve notice of a conditional fee agreement. Additionally, it also provides useful and relevant guidance on the courts’ approach to the determination of costs in a multi-party action raising multiple issues and sub-issues, in which the parties had been both winners and losers. C1 had provided information in respect of his CFA, but his company, C2, had failed to serve the required N251 form even though its solicitors informed the defendant in correspondence that they were acting under a CFA some 2 months after being joined as a party. Relief from sanction was granted from the date of that letter, predominantly on the basis that the defendant had not suffered prejudice as a result of the failure. The draft judgment was circulated pre-Mitchell, but Norris J made it clear in the final paragraph of the final judgment that he saw no need to revise it in light of the decision in Mitchell.

Norris J’s approach was endorsed by Master Gordon- Saker in (1) Harrison (2) Harrison v Black Horse Ltd 43 in which the failure to serve an N251 in Forstater was described as a “trivial failure…of form rather than substance”. It was distinguishable from the failure of the claimants in Harrison to serve any notice of a CFA in respect of appeal proceedings in the High Court and Court of Appeal, although notice had been served in respect of the first instance (and Supreme Court) proceedings: this was not, on the facts, a trivial failure and no good reason for it had been established.

There is a shortage of case law addressing the application of the new costs consequences arising in the event of failure to beat a Part 36 offer, but Davison v Leitch 44 provides one such example where consideration was given by the court to the application of the new rule 36.14(3). The successful claimant in clinical negligence proceedings was a former banker who was unable to continue in her job after suffering serious injury as a result of negligently performed surgery. She comfortably beat both the defendant’s and her own Part 36 offer. Andrews J awarded the full sum produced by adding the prescribed percentage uplift under r.36.14(3) to the damages award, and interest on costs from the date at which the offer expired until judgment at 2% above base rate, but did not award either indemnity costs or additional interest on the damages. When considering all of the circumstances of the case to determine whether it would be unjust to apply each of the consequences available to her under r.36.14(3), Andrews J gave particular weight to the fact that the claimant’s offer had been made before she had obtained permission to rely upon a witness statement, served late, which substantially bolstered her claim for loss of earnings, and before service of an updated schedule of loss. Thus the timing of a Part 36 offer, and in particular the respective states of knowledge of the parties making and receiving the offer, are of critical importance when the court considers whether to give full effect to the consequences prescribed at r.36.14(2) and (3).

See also Feltham v Freer Bouskell 45 where the claimant again beat its own part 36 offer. The 21-day period expired immediately before trial began on 4 June 2013. It would have been wrong to order anywhere near 10% above base rate on damages. The Judge allowed 3.5%. He held that the fact the claimant may have only just beaten what has been recovered was irrelevant. However, where  the 21-day  period  for acceptance expired only a very short time before trial, this may be a factor rendering unjust an order for such an enhanced damages payment. It was relevant that a key allegation only arose in opening, and that crucial notes were disclosed only days before trial. No order for increased damages was made. Enhanced interest on costs was awarded at 3.5% above base rate.

So there is – as yet – no case in which all of the part 36 consequences have been applied to their full extent. Such a case will no doubt come.

Rehill v Rider Holdings Ltd 46 looks at the impact of a withdrawn part 36 offer. The claimant accepted a part 36 offer out of time and the parties could not agree liability for costs. Whilst it was not unreasonable to have rejected the first offer because the extent of his injuries needed investigation, it was unreasonable for the claimant not to have accepted the second and he was ordered to pay the defendant’s costs from the last date for acceptance of the second, withdrawn, offer. It should be noted that this was a case of dishonest exaggeration.

Blankley v Central Manchester and Manchester Childrens University Hospitals  NHS Trust 47 will  give comfort to solicitors who find themselves in difficulty where their client loses mental capacity during the course of proceedings, or dips in and out of capacity. In Blankley the claimant first of all lacked capacity and acted via a litigation friend. She then regained capacity and her solicitors entered into a CFA with her. She then lost capacity again, and acted via a litigation friend, who was also her receiver. The defendant argued that the solicitor’s retainer had terminated automatically when she lost capacity and so no costs were recoverable from that point under the CFA. On appeal it was held that the termination of a solicitor’s authority by reason of mental incapacity did not ordinarily and of itself frustrate the underlying contract of retainer. In particular, a retainer entered into with a person known to have fluctuating capacity was not frustrated by any loss of capacity. The decision bears careful reading.