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Beware of costs sanctions if your conduct falls out of line

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By Parminder Badhan & Phil Murrin


Published 07 August 2020


Beware of costs sanctions if your conduct falls out of line

A number of recent cases have served as a stark reminder to practitioners of the importance of ensuring they comply with their duty to help the Court to further the overriding objective.  If they do not adhere to this fundamental principle there is a considerable risk that they will suffer in costs as illustrated in the cases considered below.


Disallowance of entire costs due to misconduct of Claimant’s solicitors

In the recently reported case of Farmer v The Chief Constable of Lancashire (2019), the Senior Courts Costs Office disallowed the entirety of the costs of the Claimant receiving party as a result of the unreasonable conduct of the Claimant’s solicitors during the detailed assessment proceedings. Whilst the court acknowledged that this case was fact sensitive it is important to note that one of the reasons for this decision was a finding by the court that the Claimant’s solicitor was in breach of the CPR which provides that the parties should assist the Court in furthering the overriding objective.

The Claimant’s bill as originally drawn was for £174,565.79 and included a success fee even though the conditional fee agreement (CFA) was unenforceable. The costs had also been calculated at incorrect hourly rates.  These points accounted for around a third of the bill and were eventually conceded and a replacement bill for £116,192.50 was lodged.

The Claimant’s problems did not end there, however, as the costs claimed in two parts of the replacement bill were deducted as the Court found that there was no retainer under which those costs could be recovered.  These costs had been claimed under a second CFA which the Claimant’s solicitors said was retrospective but there was no evidence on the file to show the Claimant made “what would have been a colossally bad bargain and one which – if it had indeed been made – would have created a massive conflict of interest with [his solicitors]”.  The bill also included significant costs of an application which should not have been included. 

The upshot was that the bill should have amounted to around one third of the figure contended for which would have meant that it was well below the threshold for provisional assessment, in which case the Court fee would have been correspondingly lower and the costs, absent an oral hearing, limited to £1,500 (plus VAT).  Instead, a total of four days were set aside to hear “a bill which is still not right, and which is supported by a witness statement of [the Claimant’s costs lawyer] which is not right either”.  The Court made reference to “numerous examples of documents, specifically the bill, the replies and the witness statement, which have been signed without any proper regard for the need to fact-check and ensure that matters were dealt with properly”.

After disallowing the amount claimed for drawing and checking the bill, the costs that remained amounted to approximately £60,000.

The Defendant had applied to disallow the entirety of the bill.  Under CPR 44.11, the Court’s discretionary powers in relation to misconduct include disallowing all or part of the costs which are being assessed.  The Court held that none of the deductions it had made to that point would represent a costs sanction under CPR 44.11.  This was because disallowing the bill preparation and checking was just a normal detailed assessment decision.  In addition, the Claimant’s solicitors had conceded the success fee and hourly rate points, and the decision on the second CFA was not a decision taken to penalise the Claimant’s solicitors but to put matters back on the correct footing as regards their contract with their client.

The Court held the conduct of the Claimant’s solicitors was unreasonable or improper and in breach of the CPR which requires the parties to help the Court to further the overriding objective.  This, in the Court’s view justified disallowance of what was left in the bill.


Costs sanctions for refusal to mediate

It is clear that an unreasonable refusal to mediate or engage in some other form of Alternative Dispute Resolution (ADR) process can render a party liable to costs penalties.  It is 20 years since costs sanctions were first imposed against a successful party for refusing to mediate (Dunnett v Railtrack (2002)) and the leading case in this area remains the Court of Appeal’s decision in Halsey v Milton Keynes General NHS Trust (2004). 

You could be forgiven for assuming that solicitors would by now have learned the lesson that the Courts can impose costs sanctions on those who unreasonably refuse to consider ADR and that they would have adjusted their behaviour accordingly. The following three recent cases illustrate this is not the case.

In BXB v Watch Tower (11 March 2020) the Court awarded indemnity costs to the successful Claimant, for the costs incurred after the Defendant’s unreasonable refusal to engage with the Claimant’s invitation to attend a joint settlement meeting.  It was held that the Defendant had breached the Court’s direction which required that “At all stages the parties must consider settling this litigation by any means of Alternative Dispute Resolution (including Mediation)…”

Similarly, in DSN v Blackpool Football Club (20 March 2020), the successful Claimant was awarded indemnity costs in respect of the costs incurred after the Defendant’s failure to engage in any discussion about the possibility of settlement.  The Court held that the reasons given by the Defendant for refusing to do so were inadequate.  “They were, simply, and repeatedly, that the defendant “continues to believe that it has a strong defence”.

In Wales v CBRE Managed Services Ltd (30 April 2020), the successful Defendant was penalised in costs for repeatedly declining and refusing to mediate.  The Court found that there was nothing which rendered the dispute unsuitable for mediation, and no satisfactory explanation had provided as to why the Defendant had not engaged with ADR.  The Court was satisfied that at each stage a mediation would have had a reasonable prospect of success.  The Court disallowed 50% of the Defendant’s costs during the initial period when it had failed to engage in mediation, and disallowed 20% of the Defendant’s costs during a later period as a result of a continued refusal.