Dispute resolution: recovering costs before allocation

first_img Masood Ahmed is senior law lecturer at Birmingham City University Is a costs judge entitled to take the view that a matter would have been allocated to the small claims track (and therefore requiring the paying party to pay costs on the small claims track basis) where a case is settled before allocation and the consent order provides for costs to be paid on the standard basis? This was the bone of contention in the Court of Appeal case of O’Beirne v Hudson [2010] EWCA Civ 52 (see also Drew v Whitbread [2010] EWCA Civ 53, which raised similar issues). A personal injury matter was settled before allocation for £1119.06. The consent order, which recorded the settlement, stated: ‘The defendant do pay the claimant’s reasonable costs and disbursements on the standard basis, to be subject to detailed assessment if not agreed.’ The defendants subsequently ­disputed the claimant’s bill of costs (which appeared to exceed the fixed costs allowed under part 45 of the Civil Procedure Rules), and argued that if the matter had proceeded to ­allocation it would have been allocated to the small claims track and that costs should be assessed on the small claims basis (that is, fixed costs under part 27 of the CPR). The claimant, ­however, contended that the terms of the consent order were such as to preclude the application of CPR 27 and 45. It was accepted by both parties that if the matter were allocated to the small claims track, only fixed costs would be recoverable and nothing would be allowed for the use of lawyers, as it was clear that small claims track claims are intended to be conducted without lawyers. The claimant’s argument was accepted by the district judge who held that the wording of the consent order precluded the matter being ­limited to the small claims track and the effect of the wording of the order would be to fetter her discretion. On appeal to the High Court, Judge Stephen Stewart QC found for the defendant. He confirmed that a costs judge had no power to vary a costs order which had already been made. However, the judge observed that the question was not whether the original costs order could be varied but whether the district judge was correct in concluding that the order precluded the court in its discretion in assessing costs on the small claims basis. He then proceeded to consider the actual wording of the order against the backdrop of the involvement of the parties’ solicitors and the ‘factual matrix’ of the case and held: ‘There is nothing… in the word ‘reasonable’… standard basis, or in the words ‘detailed assessment’, which takes away from the defendant their right to argue that costs should be assessed by reference to the small claims track.’ The judge concluded that the defendant’s right to argue that the matter should be assessed on the small claims basis was a matter which remained within the discretion of the court when the question of costs comes before the court for assessment. The claimant made a further appeal. The appeal court confirmed that in making an assessment, a costs judge is entitled to take into account all of the circumstances of the case (CPR rule 44.5(1)), including the fact that the case would almost certainly have been allocated to a small claims track if it had proceeded to the allocation stage. Lord Justice Waller stated: ‘In so doing she would have regard to what could or could not be recovered if the case had been so ­allocated.’ The appeal court, in dismissing the claimant’s appeal, held that a costs judge could not vary a costs order. But he could exercise his discretion when considering whether costs were ­reasonably incurred, and thus whether it is reasonable for the paying party to pay more than would have been recoverable in a case that should have been allocated to the small claims track. Therefore, a costs judge must question whether, for example, it is reasonable that the paying party should pay the costs of a lawyer. Waller LJ argued that a costs judge would not be bound to allow the costs as per a case on the small claims track, but that this would still be a highly material circumstance in considering what, by way of assessment, should be payable. O’Beirne is a significant authority on the issue of costs. The fact that the value of a claim means that a case is destined to be allocated to the small claims track (or any other track) does not necessarily mean that costs will be assessed on the basis of that track if the matter is settled before allocation. The court will always maintain its discretion when assessing costs as provided to it under the CPR. Furthermore, the mere fact that the parties have used specific wording (and in many occasions standard wording as those used in O’Beirne) in a consent order will not assist the court when it is assessing costs. The court will exercise its discretion and take into account all the circumstances of the particular case. Therefore, parties should throughout litigation revisit their costs position and ensure that the costs which are being incurred are both reasonable and proportionate for those costs to be recoverable at a later stage. last_img read more

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