3.1 CONDITIONAL FEE AGREEMENTS – GROUP LITIGATION – GENERIC COSTS

In Russell Young & Co v Kevin Brown & Ors – Lawtel 31.1.07 the Court of Appeal held that, in the circumstances, where claims had settled before proceedings had begun and there had been no opportunity for a costs-sharing order to be made, the claimants could recover generic or common costs under the terms of a conditional fee agreement, which were wide enough to encompass such costs. There was no need for any additional or collateral agreement relating to generic costs.

Generic costs are not fundamentally different or special: they are simply costs that have been shared for the purpose of keeping the costs of each claim down. The client and the paying party were protected against inflated claims by the CPR r.44.5(1)(a). The protection provided by that rule would not in any way be enhanced by the existence of a letter sent to the client by the solicitor advising that some of the costs would be expended for the benefit of other claimants but that the client would only be asked to pay a share of those costs. Such letters might only be desirable as an aid to proof of the reasonableness of a bill.

3.2 COSTS ORDER

In McGlinn v Waltham Contractors Ltd and others – Butterworths Law Direct 23.2.07 the TCC, in the course of its judgment on a sub-trial, dismissed the Claimant’s claims against the fourth Defendant. The latter sought its costs. Civil Procedure Rules 1998, SI 1998/3132, CPR 44.3, so far as material, provides: ‘… (6) The orders which the court may make under this rule include an order that a party must pay (a) a proportion of another party’s costs; … (c) costs for or until a certain date only; … (f) costs relating only to a distinct part of the proceedings … (7) Where the court would otherwise consider making an order under paragraph (6)(f), it must instead, if practicable, make an order under paragraph (6)(a) or (c)… ’

It was held that any order under CPR 44.3 should generally be made as soon as possible after the handing down of the relevant judgment and should not ordinarily be delayed merely because security for costs had been ordered. The court held that in a case where issues of liability and quantum as against each of the defendants were divided into two distinct categories, the warning from the Court of Appeal that it might be proper to defer the making of any costs order until the final outcome of the proceedings was known did not apply. It emphasised that the purpose of CPR 44.3(7) was to steer courts away from making issue-based costs orders in a typical case (which could often be difficult to assess and to quantify) when there were easier, and more appropriate, ways of dealing with those costs to achieve the overall fairness required by the CPR.

3.3 ISSUE-BASED SPLIT COSTS ORDER

In National Westminster Bank Plc v Kotonou – Lawtel 26.2.07 the Court of Appeal held that where a guarantor had succeeded in setting aside a guarantee given to a bank but had fought the case on numerous distinct bases on which he had lost, one of which was an improper allegation of fraud, the judge had been entitled to depart from the normal rule that the unsuccessful party should pay the successful party's costs and make an issue-based split costs order.

3.4 PAYMENT INTO COURT – ASSESSED COSTS

In Lahey v Pirelli Tyres Ltd – The Times 19.2.07 the Court of Appeal dealt with the question whether a costs judge had the jurisdiction at the outset of a detailed assessment of costs to order that a paying party should pay only a proportion of the costs that were ultimately assessed to be payable.

The issue arose in the context of a detailed assessment following the claimant’s acceptance of a payment made by the defendant under Part 36 of the Civil Procedure Rules. The point could also arise in the context of a detailed assessment following acceptance of a Part 36 offer and following an order for costs already made after trial, where the court had not made an order under rule 44.3(6)(a) allowing only a proportion of the costs of the successful party.

It was common ground that the power to disallow a proportion of the successful party’s costs under rule 44.3 was not available to the costs judge. Rule 36.13(2), when read with rule 44.12(1) (b), provided that where a Part 36 payment or offer was accepted without needing the permission of the court, the claimant was entitled to his costs without an order of the court. Rule 44.3 dealt with the powers of the court in relation to costs when it made an order as to costs.

It held that the effect of rules 36.13(1), (4) and 44.12(1)(b) was that, upon acceptance of the Part 36 payment, a costs order was deemed to have been made on the standard basis: see rule 12(1)(b)). That meant that the claimant was entitled to 100 per cent of the assessed costs, namely, the amount that the costs judge decided was payable at the conclusion of the detailed assessment. The district judge had no power to vary that order and decide that the claimant would be entitled to only 25 per cent of the assessed costs.

The ability of the court to vary an existing order was given by rule 3.1: “(7) A power of the court under these rules to make an order includes a power to vary or revoke the order.” It held that the power to vary or revoke an order given by rule 3.1(7) was exercisable only in relation to an order that the court had previously made and not to an order that was deemed to be made by operation of the rules.

3.5 SECURITY FOR COSTS

In International Hospitals Group Limited v Kuenyehia & Ors – Lawtel 27.2.07 the Court of Appeal held that it was for respondents to show they would be stifled if forced to provide further security. The respondents had failed to do so and the judge at first instance had therefore erred in refusing to make an order for security for costs against them. The Court of Appeal therefore exercised a fresh discretion and made an order for security for costs.

3.6 SECURITY FOR COSTS OF COUNTERCLAIM

In Hart Investments Ltd v Larchpark Ltd and another – Butterworths Law Direct 23.2.07 the question before the TCC was whether the defendant should be ordered to provide security for costs in relation to its counterclaim although the forthcoming trial might be concerned only with the main action and might be determinative of the proceedings as a whole, and it was not certain when the counterclaim would be heard. The application was made under s 726(1) Companies Act 1985.

The TCC held that it did not matter when the counterclaim was actually heard if it was otherwise appropriate to order security for costs.