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In BCX v DTA  EWHC B27 (Costs) the Claimant’s Solicitor sought the shortfall in their legal costs of £94,977.38 from their client, the court determined that nil was appropriate.
The Claimant was involved in a serious road traffic accident that left him with a serious head injury and unable to continue his job, which resulted in him being deemed a “protected party”.
The Claimant was successful in his claim for damages as the matter settled for £1.3 million plus reasonable costs.
At the approval hearing the Court ordered that the Defendant pay the Claimant’s costs on the standard basis subject to detailed assessment and provided for the following:
“Unless the Claimant’s solicitors waive their entitlement to be paid by the Claimant such shortfall in the costs recovered inter parties as they may otherwise be entitled to under the terms of their retainer, there be a detailed assessment of the Solicitor/ Client costs incurred on behalf of the Claimant and of the amount which it is reasonable for the Claimant’s solicitors to recover from the Claimant in all the circumstances such costs to be assessed on the basis provided for in CPR 46.4 and CPR 46.9.”
Inter-partes costs were agreed in the sum of £330,000.00 following mediation. The Claimant’s solicitors (IM) did not waive their entitlement to claim further costs against the Claimant and sought payment in the sum of £159,758.30 (the shortfall) from the Claimant as follows:
(i) £94,977.38 (inclusive of VAT), representing what they said was a shortfall in profit costs from those recovered from the Defendant (the ‘shortfall’ claim);
(ii) payment of a success fee in the sum of £62,848.92 (inclusive of VAT); and,
(iii) payment of the costs of an ATE premium in the sum of £1,932.
Costs Judge Brown was concerned with the approval of the compromise in respect of the Claimant’s claim for costs against the Defendant, particularly because of the importance to the Claimant as well as the controversy that had arisen in this claim and other such claims as to the correct approach to the assessment.
The court considered the Rules and Provisions concerning Children/Protected Parties and Provisional/Detailed Assessments. It was clear that the court was required to have in mind the interests of the Protected Party and the purpose of r.21.10 was to impose an external check on the propriety of settlement.
When a solicitor maintains their claim to be paid for the shortfall in costs by their client, the effect upon the Protected Party can be substantial. Consideration should be given to, for example, the ability of a Deputy to arrange and pay for care required or to provide for dependents. It should also be considered whether the claim was settled in full, or deductions were made for contributory negligence or litigation risks.
It was noted that in Simmons v Castle  EWCA Civ 1288, awards of general damages were uplifted to make up for the fact that the Receiving Party was liable to pay the additional liabilities post LASPO. In general, pre-LASPO, many claims for costs were not generally made against Protected Parties by their solicitors over and above the sums recovered, who tended to waive any further claim for costs.
IM, in their application (and later at assessment), placed reliance on the agreement with the Litigation Friend in relation to the shortfall in costs sought. The court did not accept the argument that simply because the Litigation Friend had agreed to the shortfall being recovered that it should be paid. The court, also, did not accept that it was enough that advice from counsel simply confirming that a claim for shortfall costs or a success fee looked reasonable. The court required an adequate analysis of the nature of the claims and the objections that might reasonably and properly be raised to them.
A shortfall in costs can be claimed in some cases when those costs are not recoverable inter-partes; for example, where there has been an interlocutory appeal or application in respect of which the Claimant does not recover the cost but which steps were reasonably taken to protect the interest of the Claimant, or if a client does demand a high level service which means that not all costs will be recovered from the other side the client may be required to pay the additional costs associated with such a level of service.
It was clear that it was not in the interests of the Protected Party to dispense with detailed assessment in this case even if the court had the power to do so. The court carried out a detailed assessment of the Bill of Costs on a provisional basis to be able to properly assess and consider the shortfall claim, the success fee claimed and the ATE insurance premium.
The court considered the claim for the shortfall, which included the reasonableness on an indemnity basis of associated travel time of two senior solicitors personally attending the Claimant, charges for negotiating and dealing with funding arrangements, hourly rates, counsel’s hourly rate, travel time, incoming routine correspondence, funding, and so on. The court made general observations during the assessment of the Bill of Costs in this matter:
The court calculated the assessed Bill at £274,859. Overall, the court’s assessment of the reasonable sum the Claimant was required to pay his solicitors was less than the Defendant had agreed to pay. The court found that the inter-partes compromise looked generous and should be approved.
The court was not satisfied that any payment should be made by the Protected Party in respect of IM’s claim for a shortfall; the Defendant had already paid a reasonable sum that the Claimant would have been expected to pay.
SUCCESS FEE COMMENTS AND CONCLUSION
The success fee payable to IM was payable as a percentage of the underlying time costs (20% claimed in this case). The court commented that the CFA should read that the success fee should be a percentage of the reasonable assessed time costs and not those costs which are claimed but which are found to be unreasonable.
The court was not provided with a bespoke risk assessment; the one provided being generic. The success fee claimed was not justified on the evidence provided. The court allowed 15% of the assessed costs (not 15% of the costs claimed or costs previously agreed with the Defendant).
ATE INSURANCE PREMIUM COMMENTS AND CONCLUSION
The court was satisfied that the figure of £1,932.00 for the ATE insurance premium was reasonably incurred.
The Bill observations provide an indication regarding how the court may approach a multitude of issues when undertaking an inter-partes assessment.
It is clear from Cost Judge Brown’s comments that clients should be advised what costs are unlikely to be recovered inter-partes, from the shortfall in the hourly rates, travel time, funding costs and case management/rehabilitation costs as well as other relevant factors. Unless, at the time of incurring such costs you advise your client that they are not going to be recovered, then a solicitor cannot rely on the presumption of reasonableness under r46 when it comes to a solicitor and own client assessment.
The court accepted that solicitors’ involvement in rehabilitation and the planning of it, has a direct relationship to losses and quantum. However, in view of that, Cost Judge Brown’s observations suggest that the court can look to separate such time and analyse it accordingly. This is something to be aware of when incurring and recording time which arises from case management.
Published 2 March 2022
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