Costs Follow the Event | No Reduction for Refusal to Mediate When Positions Were Polarised

Background

Assensus Limited (‘Assensus’) initiated proceedings against Wirsol Energy Limited (‘Wirsol’) over an alleged entitlement to a performance-related bonus of approximately £2.5 million. Assensus’ claim was based on a contractual agreement which it argued entitled it to the bonus for its work on certain projects, including the Cleve Hill project. The trial involved detailed examination of factual and expert evidence relating to the existence and scope of the alleged contractual entitlement. In the judgment handed down on 26 February 2025, the court dismissed all claims brought by Assensus.

Following the main judgment, various consequential matters were remitted to Mr Justice Constable for determination, including costs, interest on costs, interim payment of costs, the Claimant’s application for permission to appeal, and stay of execution pending appeal. These matters were determined based on written submissions from both parties.

Costs Issues Before the Court

The primary costs issue revolved around the general rule that costs follow the event, as per CPR r.44.2. Assensus, the unsuccessful party, accepted its liability for costs but contended that Wirsol should only receive 70% of its costs due to its refusal to mediate. Key authority cited includes Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, which establishes that depriving a successful party of costs due to refusal to mediate requires the unsuccessful party to prove that such refusal was unreasonable. Further reliance was placed on Gore v Naheed [2017] EWCA 369 and PGF II SA v OMFS Company 1 Ltd [2013] EWCA Civ 1288 which elaborate on whether refusal to mediate can be considered unreasonable.

The Parties’ Positions

Claimant’s Position: Assensus argued that Wirsol’s rejection of mediation invitations, both pre-litigation and during proceedings, was unreasonable. Assensus referenced authorities such as OMV Petrom SA v Glencore International AG [2017] EWCA Civ 195 to support the contention that parties must engage constructively in settlement processes. Assensus also raised issues related to contentious amendments in pleadings, arguing these should affect cost liability.

Defendant’s Position: Wirsol maintained that, as the successful party, it should receive its full costs. It contended that its refusal to mediate was reasonable given the polarised positions and unlikelihood of resolving the dispute via ADR. Wirsol cited Gore v Naheed to argue that choosing court adjudication over mediation is not inherently unreasonable. Furthermore, Wirsol highlighted its Part 36 Offer of £100,000 as evidence of genuine settlement attempts, countering the claim that no efforts were made to resolve the matter amicably.

The Court’s Decision

Reduction in Costs: The court reaffirmed the general principle that costs follow the event. After evaluating the specifics of the case and authorities cited, the court found Wirsol’s refusal to mediate was justified. The positions of both parties were highly disparate, and mediation was unlikely to bridge the gap. Additionally, the court recognised Wirsol’s Part 36 Offer as a valid attempt at settlement, further diminishing the justification for a costs reduction based on refusal to mediate.

Interest on Costs: The court ordered interest on costs as per Wirsol’s request, granting 2% above the Bank of England base rate from the date costs were paid until one month after the delivery of a detailed bill of costs to Assensus, followed by the Judgments Act rate of 8%. However, due to a considerable proportion of costs falling outside the approved budget, the court allowed two months for the assessment of the detailed bill before the higher interest rate applied.

Interim Payment of Costs: The court assessed an interim payment based on realistic calculations. Considering both budgeted and non-budgeted phases of incurred costs, the court allowed 90% recovery for budgeted phases up to £256,369.39 and 60% for non-budgeted phases leading to £151,543.90. Consequently, the total interim payment ordered was £407,913.39.

Permission to Appeal and Stay of Execution: The application for permission to appeal was thoroughly examined. The grounds including errors in fact and law, claims of quantum meruit, unjust enrichment, and issues regarding Invoice 176 were all reviewed. The court found none had a realistic prospect of success. The request for a stay of execution pending appeal was also denied, as insufficient evidence was provided to demonstrate that such an order would stifle the appeal.

 

Costs Orders | No QOCS Protection for Claimants Without Personal Injury Claims

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BB & Ors v Khayyat & Ors [2025] EWHC 443 (KB) was a case involving multiple claimants and defendants, culminating in significant determinations on costs. Initially, the claimants, including BB, CC, DD, EE, FF, GG, HH, and II, brought claims against Mr Moutaz Al Khayyat, Mr Ramez Al Khayyat, and Doha Bank Limited. The claims entailed various allegations, including claims for personal injuries and damages resulting from purported actions by members of the al-Nusra Front, which caused loss of property and livelihoods in Syria.

Several key developments led to the costs determination.

The first key procedural event was the application to disapply the presumptive costs rule under CPR 38.6 by the Discontinuing Claimants (EE, FF, GG, HH). This application was dismissed on 19 February 2025, with the court ordering that the Discontinuing Claimants bear the Bank’s costs for the application, subject to detailed assessment.

Subsequently, a hearing was held on costs consequential to the dismissal of the Discontinuance Application and the earlier striking out of the claims by the Continuing Claimants (BB, CC, DD, II) on 1 July 2024. During this hearing, the Bank pursued interim payments on account of costs, an issue fiercely contested by the Discontinuing Claimants.

The complexity of the costs determination was augmented by intricate issues such as the Qualified One-Way Costs Shifting (QOCS) protection and an existing Undertaking provided by the claimants’ solicitors, McCue Jury. The discretionary application of QOCS under CPR 44.16(2)(b) was central to the arguments against interim payments. Additionally, concerns arose over the continued validity of the Undertaking, which had been intended as security for the Bank’s costs of a Jurisdiction Application.

Issues Before the Court

The primary costs issue in dispute stemmed from the dismissal of the Discontinuance Costs Application and the striking out of the Continuing Claimants’ claims. Specifically, whether the Discontinuing Claimants should be subject to interim costs order under CPR 44.2(8) and the implications of the QOCS protection.

The Parties’ Positions

The Discontinuing Claimants argued against interim payments on two primary grounds. First, they proposed that the court should exercise discretion to grant QOCS protection per CPR 44.16(2)(b), arguing that such consideration should occur only after detailed assessment. They contended that the mixed nature of the claims, involving both personal injuries and property damages, allowed for a broad application of QOCS protection across all claims within the proceedings.

Conversely, the defendant, Doha Bank Limited, sought interim payments (totalling £1.3m) for costs incurred in the Discontinuance Application, the Jurisdiction Application, and the overall proceedings. They argued that the provisions under CPR 44.16(2)(b) only applied to individual claimants with personal injury claims, and thus, the Discontinuing Claimants did not merit QOCS protection. Additionally, they maintained the enforceability of the Undertaking and called for separate orders to streamline the costs process.

The Court’s Decision

Mr Justice Soole ruled in favour of awarding the Bank interim payments on account of costs, rejecting the Discontinuing Claimants’ submissions on both the QOCS and Undertaking issues.

Regarding the QOCS issue, the court reaffirmed that QOCS protection applied only to individual claimants within the proceedings whose claims included damages for personal injuries. This interpretation aligned with precedents such as Wagenaar v. Weekend Travel Ltd and Brown v Commissioner of Police of the Metropolis. As the Discontinuing Claimants’ pleadings did not substantiate any personal injury claims, they were not entitled to QOCS protection. Consequently, interim costs orders under CPR 44.2(8) were justified.

Interpreter’s Fee Of £924 Deemed Recoverable Under The RTA Protocol But Disproportionate To £20,000 Settlement | Reduced To £794.40

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This case involved a determination regarding the quantum of a specific disbursement in the claim between Raphael De Lima Santiago (the Claimant) and the Motor Insurance Bureau (the Defendant). The procedural journey began when the Claimant, a Brazilian national whose first language is Portuguese, was involved in a road traffic accident on 22 May 2018 while working as a delivery driver in London. The accident, involving a Honda motorcycle driven by him and a scooter driven by Mr Joshua Odubolo, led to the motorcycle being deemed uneconomical to repair. Subsequently, the Claimant’s legal action included a claim for the cost of hiring a replacement motorcycle, amounting to over £46,000. The claim was initiated through the Road Traffic Accident (RTA) Protocol and filed at the County Court Money Claims Centre on 17 May 2021, a day before the expiration of the limitation period. Mr Odubolo did not mount a defense, leading to the Motor Insurers’ Bureau (MIB) being involved as a second defendant due to uncertainties regarding Mr Odubolo’s insurance status. The claim proceeded to trial at the County Court after being allocated to the Fast Track. The Claimant’s witness statement, originally in Portuguese, was translated into English by Bond Turner Solicitors, who also booked an independent interpreter for trial compliance. This direction was necessitated by the court’s conditions, precluding the use of internal translators from the Claimant’s solicitors at trial. On the day of trial, 11 August 2022, the case settled, with the MIB agreeing to pay £20,000 and the Claimant’s costs summarily assessed at £13,746.03. However, the Deputy District Judge Sneddon excluded the Interpreter’s Fee, citing CPR 45.29I(h) and relying on the Court of Appeal’s decision in Cham (A Child) v Aldred. Permission to appeal was granted, leading the matter to the Court of Appeal, which focused on the interpreter’s fee recoverability as a necessary disbursement due to the access to justice principle outlined in the overriding objective and Practice Direction 1A. The Court of Appeal, in its decision dated 14 July 2023, remitted the case for further determination of the reasonableness and proportionality of the interpreter’s fee quantified at £924. The court’s directions included guidelines for the defendant to challenge the fee if necessary within a given timeframe. The case was remitted to the court court and came before HHJ Dight CBE on 6 September 2024. Judgment was handed down on 21 February 2025.

Costs Issues Before the Court

The primary costs issue before the court was the assessment of the interpreter’s fee under CPR 45.29I(h). Following a remittance by the Court of Appeal to consider this disbursement, the central question was whether the fee for instructing an interpreter at the trial of the claim, claimed at £924 including VAT, was proportionate and reasonable. The Defendant’s contention included an alleged failure by the Claimant to provide a breakdown of the fee, suggesting the court either assess the fee at nil or reduce it to £300, drawing on the market rate for such services. The considerations also involved whether any part of the fee constituted an irrecoverable agency element, and if so, the impact of such an element on the recoverability of the total fee.

The Parties’ Positions

The Claimant, represented by Ben Williams KC, maintained that the interpreter’s fee, although involving an intermediary service provider, was a reasonable and proportionate fee within market standards. They argued that the booking was necessitated by the professional service context, and thus, a higher fee encompassing operational costs of the service provider was inevitable. The Claimant supplied comparable market quotations to substantiate their position, indicating the fee fell within a typical range and emphasising that any reduction should still recognise a reasonable market cost. Contrarily, the Defendant, through Robert Marven KC, contended the fee was unreasonably inflated and included an agency component that should not be recoverable under CPR 45.29I(h), referencing Crane v Canons Leisure Centre. They stressed the need for transparency, urging the court to compel disclosure of the fee breakdown, and argued for a reduction to a minimal sum of £300, aligned with direct bookings from public registers of interpreters at standard flat rates.

The Court’s Decision

His Hon Judge Dight CBE held that the interpreter’s fee was indeed a recoverable disbursement under CPR 45.29I(h). The Judge, after a meticulous analysis, rejected the argument that the fee should include an irrecoverable agency component when sourced through an intermediary. It was acknowledged that market practices for obtaining professional services often involve such intermediary costs, and the fee should be judged against prevailing market rates. The Court referenced the competitive market context for such services, drawing on data provided by the Claimant’s costs draftsman, Mr Neil Ryder, which showed a reasonable range of fees from similar service providers. The decision also took into account the proportionality rule under CPR 44.3, considering the entirety of the claim. The Judge held that the £924 fee was at the high end of the market range and was not proportionate to the claim’s settlement value and should be adjusted. Consequently, he determined an adjusted reasonable fee would be £662 plus VAT, totalling £794.40, thereby ensuring the fee was fair, reasonable and aligned with the proportionality bounds in relation to the claim’s overall value.

Costs Management | “Unrealistic And Unreasonable” Costs Budget Leads To Adverse Costs Award

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Background

These proceedings concern a complex construction dispute involving multiple defendants related to alleged defects in student accommodation constructed using modular building techniques. The claimants, GS Woodland Court GP 1 and GP 2 Limited, acting as general partners for GS Woodland Court Limited Partnership, brought proceedings against seven defendants involving significant allegations concerning fire safety attenuation and construction defects.

The construction was managed on a construction-management basis, with seven defendants spanning different aspects of the project: the construction manager, architect, cladding contractor, modular unit supplier, developer, fire-stopping works contractor, and installer. The claim involved allegations that numerous fire safety defects had not been properly implemented in the modular accommodation.

A half-day Costs Management hearing was convened to assess and manage the litigation costs, during which an unusual application was made by several defendants for their costs of the Costs Management hearing itself. The total claim against the defendants was approximately £11 million, with potential remediation costs estimated at £30 million.

Costs Issues Before the Court

The primary costs issues before the court included:

1. Assessment of the reasonableness and proportionality of the claimants’ costs budget
2. Evaluation of the claimed hourly rates against guideline rates
3. Consideration of the defendants’ application for costs of the Costs Management hearing
4. Determining an appropriate approach to costs management in multi-defendant construction litigation

The Parties’ Positions

The claimants (represented by Ms Packman KC) argued that the complexity of a multi-defendant case justified their approach. They initially sought a costs budget of £8.74 million, which was subsequently reduced to approximately £7.4 million.

The defendants (particularly represented by Ms Stephens KC) contended that the claimants’ costs were disproportionate and unreasonable. They highlighted significant discrepancies between the claimed rates and the Guideline Rates, with the claimants’ solicitors charging substantially higher rates without meaningful justification.

The Court’s Decision

Mr Justice Constable made several critical observations:

1. Rates: The claimed rates significantly exceeded Guideline Rates, with Jones Day charging rates substantially higher than recommended. The court indicated a potential downward adjustment of approximately £1.4 million solely based on rate reductions.

2. Proportionality: While acknowledging the case’s complexity, the judge suggested the claimants’ costs were potentially disproportionate, particularly when compared with the defendants’ aggregate costs.

3. Costs Management Hearing: Applying recent authorities (Nicholas Worcester v Dr Philip Hopley and Jenkins v Thurrock Council), the court determined that the claimants’ unrealistic initial budget warranted potential cost consequences.

4. Final Outcome: The court approved a reduced budget of £4.212 million for estimated costs and granted the defendants’ application for costs of the Costs Management hearing, with D2, D3, and D4/D5 recovering their reasonable attendance costs from the claimants.

Costs Management Hearing | Unrealistic Budgets May Face Adverse Costs Orders

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Background

This legal judgment concerns a complex personal injury claim arising from a tragic road traffic accident that occurred on 31 March 2018 involving multiple parties. The primary claimant, Mr Leon Zavorotnii, a Moldovan resident in the United Kingdom, suffered severe and life-altering injuries when travelling as a passenger in a vehicle driven by Mr Lucasz Malinowski, both of whom were employed as night shift cleaners at the Norton Industrial Estate in North Yorkshire.

The accident transpired when Mr Malinowski’s VW Bora vehicle collided with a stationary Volvo HGV tractor and trailer parked roadside without illumination. Mr Malinowski subsequently pleaded guilty to driving without due care and attention, while the HGV driver, Mr Plamen Nikolov, pleaded guilty to allowing a vehicle to remain stationary during darkness without lights.

The proceedings were characterised by significant procedural complexity, notably including claims initiated outside the standard three-year limitation period. Judge Walden-Smith exercised discretion under Section 33 of the Limitation Act 1980 to allow the proceedings to continue against Mr Malinowski, recognising the substantial nature of the claim.

Mr Zavorotnii alleged extensive personal injuries, including skull and facial fractures, severe traumatic brain injury, dental damage, psychiatric and psychological trauma, sensory impairments, and potential long-term neurocognitive disabilities. These injuries were alleged to have comprehensively disrupted the claimant’s educational and professional prospects, potentially rendering him unable to live independently.

Costs Issues Before the Court

The primary costs issue centred on the approach to be taken regarding costs orders following a discrete costs management hearing. Specifically, the court was required to determine whether the standard “costs in the case” order was appropriate, or whether an alternative costs order might be justified given the parties’ conduct during costs budgeting.

The Parties’ Positions

The defendant, Mr Malinowski, argued that the court should depart from the conventional “costs in the case” order. He submitted that the claimant had presented an unrealistically high and ambitious costs budget, necessitating significant judicial intervention and time expenditure during the costs management process.

The claimant contended that the costs management hearing was routine and that the standard “costs in the case” order should be maintained. They suggested that any criticism of their costs budget should be limited to a cautionary “shot across the bow” for future proceedings.

The Court’s Decision

After careful consideration, Judge Walden-Smith determined that while the “costs in the case” order would be maintained in this instance, the judgment represented an important commentary on costs management practices. The court recognised that CPR 44.2 provides significant judicial discretion in costs orders.

The judgment highlighted that the claimant’s costs budget was significantly reduced from £511,125.30 to £308,909.30 – a reduction of £202,216 and representing only 60% of the original claim. While the claimant achieved some success by obtaining an 18.2% increase over the defendant’s offered budget, the court viewed the original budget as verging on being “unrealistic”.

Critically, the judgment warned that future costs management hearings might result in adverse costs orders against parties presenting manifestly inflated or unreasonable costs budgets. This represents a potentially significant development in judicial approach to costs management, signalling increased scrutiny and potential financial consequences for parties presenting excessive or poorly prepared cost estimates.

Without Prejudice Letter Reveals Fundamental Dishonesty Undermining Claimant’s Case

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Background

The legal proceedings stem from a road traffic accident that occurred on 20 July 2018, involving Mr Keith Morris, the claimant, who was riding a motorcycle, and Mr William Simon Williams, the defendant, who was driving a vehicle. The accident was initially acknowledged as resulting from the defendant’s negligence, with the fundamental issue being the extent of injuries sustained by the claimant.

The defendant filed an amended defence on 6 April 2023, alleging fundamental dishonesty by the claimant. The defendant contended that Mr Morris had substantially exaggerated the effects and extent of his injuries, supporting this claim with surveillance footage purportedly demonstrating the claimant performing various daily activities inconsistent with his injury claims.

The procedural history reveals a complex legal journey, with the matter coming before District Judge Dodsworth on 22 January 2025. The specific application before the court concerned a Part 18 request and the potential admissibility of a letter dated 12 May 2023, which was marked “Without Prejudice – save as to costs”.

The letter, authored by Minster Law (the claimant’s solicitors), represented a Calderbank Offer attempting to settle the claim. Notably, the offer included a provision for the claimant to admit fundamental dishonesty, but only within the confines of a non-disclosure agreement preventing any public discussion of the case.

Costs Issues Before the Court

The primary costs issue centred on the admissibility of the without prejudice correspondence, specifically whether the letter could be introduced as evidence given its potential demonstration of fundamental dishonesty. The court was required to determine whether the letter fell within the narrow exceptions to the without prejudice rule, particularly the “unambiguous impropriety” exception.

The Parties’ Positions

The defendant argued that the letter should be admitted as evidence because it demonstrated the claimant’s acceptance of fundamental dishonesty. Mr Paul Higgins, counsel for the defendant, referenced previous cases such as Merrill Lynch v Raffa, where without prejudice communications were admitted to prevent potential fraud.

Conversely, the claimant, represented by Mr David Morris, contended that the letter did not constitute a clear admission of fundamental dishonesty. He emphasised the need to construe the unambiguous impropriety exception narrowly, particularly at an interim stage of proceedings, citing authorities including Motorola Solutions Inc v Hytera Communications Corporation and Ocean on Land Technology v Richard Land.

The Court’s Decision

District Judge Dodsworth carefully examined the legal principles governing without prejudice communications, drawing on established precedents such as Rush & Tompkins Limited v Greater London Council and Unilever PLC v The Proctor & Gamble Company.

The judge ultimately determined that the letter did contain a clear admission of fundamental dishonesty. Despite the future-tense language, the court viewed the letter as substantively admitting potential misrepresentations in the claim. Crucially, the judge found that excluding the letter would permit the claimant to pursue a case known to be, at least partially, false.

Applying the unambiguous impropriety exception, the court ruled that the public interest in full disclosure outweighed the protection typically afforded to without prejudice negotiations. The letter was therefore allowed to be adduced as evidence, a decision analogous to the approach in Merrill Lynch v Raffa.

Points of Dispute Struck Out Due To Wholesale Non-Compliance

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Background

This complex legal costs judgment stems from a multifaceted professional negligence dispute involving Niki Christodoulides and her former legal representatives, CP Christou LLP. The origins of the case can be traced back to four original claims between the claimant and her sister, two of which were ultimately decided against Christodoulides, with trial judges making uncompromising findings of dishonesty.

Following these initial proceedings, Christodoulides brought a professional negligence claim against CP Christou LLP and a second defendant (her former counsel). This claim was heard before Knowles J over two days in December 2022, resulting in a comprehensive 73-page, 250-paragraph judgment delivered on 13 June 2023.

Knowles J comprehensively dismissed the professional negligence claim on multiple grounds. Specifically, he found that the Particulars of Claim disclosed no reasonable grounds for bringing the claim, possessed no reasonable prospects of success, and constituted an abuse of process. The judge was particularly critical of the pleading, describing it as incoherent and impossible to follow.

The judgment highlighted several key procedural issues, including the claimant’s attempt to challenge the accuracy of trial transcripts from previous proceedings. Knowles J explicitly noted the confusion surrounding these transcripts and chose not to delve into their details, instead relying on the original trial judges’ findings.

When Christodoulides sought permission to appeal, Stuart-Smith LJ comprehensively rejected her arguments, particularly regarding the transcript allegations. The appeal judge emphasised that the claimant had failed to identify any material inaccuracies that could have influenced the original proceedings’ outcomes.

Costs Issues Before the Court

The primary costs issue before Deputy Costs Judge Roy was the assessment of CP Christou LLP’s costs bill, which totalled approximately £132,000. The central preliminary point concerned the compliance of the claimant’s Points of Dispute (PoDs), which the defendant argued were so defective that they should be struck out entirely.

The Parties’ Positions

The first defendant (CP Christou LLP) argued that the claimant’s Points of Dispute were fundamentally non-compliant with Practice Direction 47.8.2, which mandates that Points of Dispute must be short, focused, and clearly identify specific points of challenge. Counsel for CP Christou LLP submitted that the 32-page document was prolix, discursive, and failed to identify any specific bill items or provide comprehensible challenges to the costs claimed.

The claimant, acting in person, presented various allegations of misconduct, including claims about transcript inaccuracies and alleged breaches of legal privilege. However, she did not effectively address the core procedural issues regarding the Points of Dispute’s non-compliance.

The Court’s Decision

Deputy Costs Judge Roy KC comprehensively rejected the claimant’s approach. While acknowledging a few marginally compliant points, the judge found that the Points of Dispute were fundamentally non-compliant with legal requirements. Applying the principles established in Ainsworth v Stewarts Law LLP, the court held that the document was so defective that it prevented a fair and proportionate assessment of costs.

The judge was particularly critical of the claimant’s attempts to resurrect allegations already rejected in previous proceedings, describing her approach as an abuse of process. The misconduct allegations were dismissed as immaterial, imprecise, and incapable of meaningful investigation within the costs assessment framework.

Ultimately, the court struck out most of the Points of Dispute, leaving only a few minor points to be assessed. The judgment serves as a stark reminder of the importance of procedural compliance and the need for clear, focused challenges in costs proceedings.

Damages-Based Agreement Invalidated For Failure to Comply with Regulatory Requirements

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Background

The case of Reeves v Frain represents a complex and significant legal dispute involving probate proceedings and a detailed examination of Damages-Based Agreements (DBAs). The underlying dispute concerned the validity of a will dated 7 January 2014, made by Kevin Patrick Frain, which was challenged by his daughter, Louise Michelle Reeves. The Second and Fourth Defendants maintained that the 2014 will was invalid, alleging it was procured without the deceased’s consent.

On 31 January 2022, following an extensive trial, Green J delivered a judgment in favour of the Defendants, pronouncing probate of the deceased’s earlier will dated 18 April 2012 and declaring the 2014 will invalid. The court found that the Claimant had not proven that the deceased knew and approved the 2014 will. The estate in question was substantial, valued at approximately £100 million.

The Defendants funded their legal action through Damages-Based Agreements (DBAs) with The London Litigation Partnership Ltd (LLP). These agreements were structured to provide legal representation in exchange for a percentage of any financial recovery. The DBAs were entered into in late 2020 and early 2021, with the Second Defendant’s agreement dated 16 February 2021 and the Fourth Defendant’s dated 16 December 2020.

Costs Issues Before the Court

The primary legal issues centred on the enforceability of the Defendants’ DBAs and whether they complied with the statutory requirements outlined in the Courts and Legal Services Act 1990 and the Damages-Based Agreements Regulations 2013. Specifically, the court was required to determine four key issues:

1. Whether the DBAs provided for payment out of sums recovered, as mandated by the regulations
2. Whether counsel’s fees were improperly charged as expenses in addition to the primary payment
3. Whether the payment was properly ‘netted off’ against inter partes costs recovery
4. Whether the DBAs had been wrongfully terminated or repudiated by the solicitors

The Parties’ Positions

The Claimant argued that the DBAs were unenforceable due to multiple regulatory breaches. Her primary contentions were that:

– The DBAs did not provide for payment exclusively from sums recovered
– Counsel’s fees were improperly charged as additional expenses
– The agreements failed to properly net off inter partes costs recovery
– The solicitors had effectively repudiated the agreements through their correspondence of 16 February 2022

The Defendants contended that the DBAs were valid and enforceable, arguing that:

– The definition of ‘financial benefit’ in the Act was broad and should be interpreted purposively
– The agreements substantially complied with regulatory requirements
– Any departures were immaterial and should not invalidate the entire agreement
– The solicitors had not repudiated the DBAs and the agreements remained valid

The Court’s Decision

Costs Judge Brown comprehensively rejected the Defendants’ arguments, finding that the DBAs were unenforceable on multiple grounds. The key findings were:

1. The DBAs failed to comply with the requirement to provide payment from sums recovered, as the claim was for a declaration and did not involve a quantifiable monetary recovery
2. Counsel’s fees were improperly charged as expenses, in violation of the regulatory framework
3. The agreements could not be saved through severance due to public policy considerations
4. The solicitors’ attempts to create a new private retainer were ineffective and potentially void

The judgment represents a stringent interpretation of the DBA regulations, emphasising client protection and strict compliance with statutory requirements. The court’s approach underscores the continuing significance of public policy considerations in litigation funding arrangements.

Non-Party Costs Order Application Denied Due to Significant and Unexplained Delay

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Background

The legal proceedings stem from a complex and lengthy pharmaceutical litigation involving several hundred claimants against GlaxoSmithKline UK Limited concerning its anti-depressant medication Seroxat. The claim, originally commenced on 30 April 2004, represented a substantial group litigation alleging the medication was defective and had caused harm to the claimants.

The litigation’s procedural history reveals significant challenges and transformations. Initially publicly funded, the claim underwent dramatic changes when the Legal Services Commission discharged the public funding certificate in November 2010, following counsel’s advice questioning the claim’s merits. This decision precipitated a significant reduction in claimant numbers, with 369 discontinuing their claims while 124 challenged the decision.

By January 2015, a review panel had conclusively rejected the claimants’ challenge, effectively terminating their public funding. The litigation’s landscape shifted dramatically when Fortitude Law entered as legal representatives for 102 claimants in July 2015, signalling new funding arrangements involving discussions with external funders and insurers.

A pivotal moment occurred on 19 November 2015 when Brit UW Limited issued an after-the-event (ATE) legal expenses policy to the claimants. This policy, providing potential cost protection up to £750,000, became a critical factor in the court’s deliberations about whether the proceedings could continue.

The trial, which commenced on 29 April 2019 before Lambert J, was effectively concluded within three days when a fundamental issue regarding the claimants’ case on defect was decided in the defendant’s favour. By 7 May 2020, the claimants submitted to judgment, with only costs arguments remaining unresolved.

Lambert J’s order on 3 July 2020 was particularly significant, ordering the claimants to pay costs on an indemnity basis and setting a crucial deadline of 31 July 2020 for any non-party costs order (NPCO) applications. This deadline became the focal point of the current legal dispute.

Costs Issues Before the Court

The primary costs issue centred on the defendant’s application for an extension of time to pursue a non-party costs order (NPCO) against Brit UW Limited, the ATE insurer. The critical questions were whether the original order carried an implied sanction for non-compliance and, if not, whether the court should exercise its discretion to grant a substantial time extension.

The Parties’ Positions

The defendant argued that no implied sanction existed in Lambert J’s original order, and therefore the application should be assessed under the overriding objective rather than the stringent Denton test. They contended that until Brit’s communication on 25 May 2023, there was no apparent need for an NPCO application.

Conversely, Brit argued that the order carried an implied sanction, necessitating the application of the Denton test. They emphasized the defendant’s significant delay, lack of urgency, and failure to proactively manage the potential NPCO application within the originally prescribed timeframe.

The Court’s Decision

The court comprehensively rejected the defendant’s application, finding that while no strict implied sanction existed, the defendant had failed to demonstrate a justifiable reason for the extensive delay. The judgment highlighted the defendant’s slow progression, missed opportunities to seek timely extensions, and lack of urgency in pursuing the potential NPCO.

Crucially, the court emphasized that the original order was designed to expeditiously resolve residual litigation matters. The defendant’s failure to promptly consider and address the potential NPCO application, despite known complexities surrounding the ATE insurance, was a significant factor in the court’s decision to refuse the time extension.