Newsletter: Issue 13

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Defendant CFAs approved by the Courts

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The Court of Appeal has upheld the principle underpinning CFAs between Defendant Solicitors and their clients. The important case of Gloucestershire County Council v Evans [2008] EWCA Civ 21 (http://www.bailii.org/ew/cases/EWCA/Civ/2008/21.html) could potentially have severely curtailed the use of CFAs by Defendants, but the judgment, in fact paves the way for increasing use of such agreements.

The solicitors in Evans acted on behalf of a Claimant local authority in bringing proceedings in relation to undertakings given by the Defendants as part of an agreement for the purchase of land by the local authority. They were originally instructed in May 1998 under the terms of a traditional retainer. However, in April 2002, the retainer was changed to a CCFA. The claim was settled with the Defendants to pay the Claimant damages of £135,000 together with costs.

The costs could not be agreed and the paying party argued that the CCFA was invalid such that no costs were payable under the same. This was based on the terms of the CCFA in relation to the costs payable in the event of a win and the success fee thereon. The CCFA set out the hourly rates chargeable:

• The basic charges were based on an hourly rate of £145.


• If the case was won, the solicitor was entitled to basic charges and a success fee of 100%.


• If the case was lost, the solicitor was entitled to a discounted hourly rate of £95. without any success fee.

The paying party’s argument was that:

• The solicitors were entitled to an hourly rate of £95 irrespective of whether the case was won or lost.


• In the event of a win, they were entitled to an increased hourly rate of £145.


• Therefore the amount at risk, based on whether the case was won or lost, was £50 per hour.


• In the event of success, the solicitor’s success fee was £145 per hour.


• This success fee was effectively a 290% increase on the £50 at risk and, as this exceeded the statutory maximum, the CCFA was invalid.

The Court did not agree:

The Court of Appeal has therefore sanctioned CCFAs where the Defendant retains the advantages of an agreed low hourly rate agreed with their solicitors, but the solicitor can recover higher hourly rates in the even of a successfully defended claim, thereby providing a real incentive to the Claimants to settle cases rather than risk proceeding to trial. One suspects that Defendants will increasingly use such agreements to seek to even out the growing use of CFAs by Claimants.

Part 36 Offers

Part 36 offers are an essential element of a party’s strategy and tactics in any personal injury claim. For a Claimant, it presents the opportunity to put pressure on a Defendant to settle a claim rather than risk facing a potentially expensive order for costs on the indemnity basis and for a Defendant, a well timed Part 36 offer can often persuade a Claimant to settle the claim for less than they would expect. In light of this, the Court of Appeal’s recent decision in Carver v BAA (2008) on the costs consequences of Part 36 offers is essential reading for any practitioner.

The Claimant, Miss Carver, was an air hostess who suffered an accident at work when she stepped from a lift which had stopped some 2 feet below floor level. She suffered ligament damage to her ankle and was absent from work for a 4 week period. She claimed against her employers and the Defendant quickly admitted liability. Thereafter, the Claimant’s solicitors obtained a medical report and disclosed this to the Defendant together with a schedule of loss for £2,170. Nine months later, a further medical report was obtained and disclosed and in November 2005, the Defendant made a Part 36 offer of £3,486 in addition to a previous interim payment of £520, making the total offer £4,006. The Claimant did not accept the offer and obtained a further medical report from an expert in ankle injuries. This was disclosed in March 2006 and proceedings issued later that month, with the claim pleaded at between £5,000 and £15,000. In June 2006, the Defendant made a further Part 36 offer of £4,520 and this was also rejected by the Claimant. In September 2006, the Claimant served an updated schedule of loss in excess of £19,000 and as a result, the case was transferred from the fast track to the multi track. The Defendant therefore obtained their own medical report and, following agreement between the experts, the schedule of loss was amended back down to £2,700. The Defendant then made an offer to settle the Claimant’s damages, interest and costs in the sum of £20,000 to which the Claimant responded with a Part 36 offer of £12,500. This offer was then withdrawn and the Claimant made a further offer of £20,000. This was rejected and the matter proceeded to trial.

At trial, damages were assessed at £4,686.26 including interest. After factoring in the interest accrued since the Defendant’s Part 36 offer, it was agreed that the Claimant had beaten the Defendant’s Part offer by a mere £51. On this basis, the Claimant sought their costs of the claim on the standard basis. The Defendant, by contrast, argued that the Claimant’s costs should be limited to a date 21 days after the Defendant’s Part 36 offer.

The trial judge was not persuaded that the Claimant had obtained a judgment more advantageous that the Defendant’s Part 36 offer, notwithstanding that the Claimant recovered £51 more than the offer: The Defendant was therefore awarded their costs from 27th June 2006, being 21 days after the Part 36 offer of £4,520. The judge then went further and made no order for costs from the date of the Defendant’s pre-issue offer of £4,006. The Claimant’s costs were therefore limited to costs incurred up to November 2005. On this basis, the Claimant’s appealed.

The Court of Appeal, in considering its decision, surveyed not only the case law in this area, but also compared the previous incarnation of CPR Part 36 prior to April 2007. Under the old rule, where a Claimant obtained damages for a monetary claim in excess of a Part 36 offer, they were entitled to their costs. The new rule, with its phrase of ‘more advantageous’ was intended to put money claims and non money claims on a common footing, hence the more ‘open textured’ phrase (to quote Rix LJ). The new Part 36 encouraged the courts to take a more holistic view of whether a Part 36 offer had been bettered, in the sense that a more advantageous result had been obtained, and this went beyond a simplistic comparison of offer and judgment.

The Court therefore concluded that the trial judge was entitled to exercise his discretion as he had and upheld the decision that the Claimant had failed to achieve judgment more advantageous that the Defendant’s offer. The order that the Claimant had to pay the Defendant’s costs from June 2006 was upheld.

As to the order for costs from November 2005 to June 2006, the Court of Appeal was not inclined to interfere with the trial judge’s exercise of discretion and therefore upheld this element of the costs order as well. Consequently, the appeal was dismissed.

This is a very important decision. The outcome of trials in personal injury claims are often considered either a win or a loss, dependent on whether a Defendant’s offer was been bettered or not. This dichotomy is, however, too simplistic. The costs provisions of the CPR are all about a more graded approach. Cases are to be approached on their individual merits having considered all of the relevant factors. Primary amongst these factors is the conduct of the parties. The Claimant’s had made little effort to compromise this claim from the beginning, whereas the Defendant’s had made offers which turned out to be not unreasonable, even if they were slightly light. The Claimant’s failure to reciprocate was a major factor in the Court’s approach. As with many cases dealing with costs, a party will often find its conduct of the litigation coming back to haunt them when it comes to dealing with costs of the case.

The full judgment is available at http://www.bailii.org/ew/cases/EWCA/Civ/2008/412.html

CPR Update

The Civil Proceedings Amendment No. 2 Rules 2007 introduce the latest set of amendments to the Civil Procedure Rules and come into force on the 1st April 2008. Amongst the changes are:

• Rule 3.7A – Payment of fees in Counterclaims and the consequences of non-payment


• Rule 3.1 Practice Direction – A new practice direction setting out the appropriate procedure to be followed for mesothelioma claims


• Rule 47.4 Practice Direction – Clarification regarding the venue for a Detailed Assessment


• Rule 52 Practice Direction – A new table setting out the route of appeals

Case Law Update

Accident Line Protect scheme: Hibberd v Fawcett [2008] EWHC 90102 (Costs) The Accident Line Protect scheme was fundamentally different from a claims management referral scheme in that the scheme was primarily concerned with marketing, quality control and training, rather than referrals of cases. A solicitor did not therefore have to disclose to their client that they had an interest in recommending the Accident Line ATE policy under CFA Regulations 2000 s4(2)(e)(ii).

Increase in hourly rates: Puksis v Brumby [2008] EWHC 90095 (Costs) The Court held that where a CFA states that the hourly rates will not be increased by more than the Retail Prices Index, the solicitor was bound by this term and any increase that purported to exceed this would not be payable.

CFA Validity: Woolley v Haden Building Services [2008] EWHC 90097 (Costs) It was not necessary for a solicitor to physically see and consider a client’s insurance documents when advising as to funding options before entering into a CFA to pursue a fatal asbestosis claim. It was reasonable to rely on the Claimant’s own investigations, particularly as it was highly unlikely that any existing insurance would cover a claim of this nature.

Disclosure: Gower Chemicals v Neath Port Talbot BC [2008] EWHC 735 (QB) A party who failed to disclose an expert report during litigation and sought the costs of that report should disclose the same as part of the assessment process. Absent disclosure, the Court could disallow the cost of the report.

RTA Predictable costs: Askari v Clucas (2008) Birkenhead CC (Unreported) DJ Baker Where a Claimant has issued proceedings prematurely, costs were limited to the costs that would have been recoverable under the predictable costs scheme for a case that settled without the issue of proceedings.

LCN Free Seminars

In response to the very positive response LCN have received to our free legal costs seminars, we now offer a range of different courses dependent on your particular requirements. These include:

• An Introduction to Legal Costs
• Conditional Fee Agreements – An Introduction
• Current Issues in Legal Costs
• Conditional Fee Agreements – Recent Developments
• Conduct – How to minimise your legal costs spend from claim inception to assessment

Comments on previous seminars:

'The clearest costs presentation I’ve heard with excellent supporting material.’
‘The presenter was very knowledgeable’
‘An excellent talk on an ever changing subject’

We are also happy to tailor a bespoke seminar to match your exact requirements. Please contact Paul Jones paul.jones@lcnltd.co.uk - 0161-742 4575 for further information.