Costs and allocation: where damages fell below the threshold

Where a claim is for a sum less than £10,000 it will be allocated to the small claims track and only limited costs will be recoverable, ordinarily restricted to court fees and expenses.

In Khan v Aviva Insurance Limited (unreported) the Defendant’s insured reversed her car into the Claimant’s vehicle. The Claimant brought a claim for personal injury and credit hire charges. The claim was allocated to the fast track.

The personal injury claim was not made out and was dismissed accordingly, but the credit hire claim was successful and the Claimant was awarded £6,265.80. This set up the following argument on costs:

a. The Claimant said that fixed costs pursuant to CPR 45.29B should apply (c. £5,000 plus allowable disbursements);
b. The Defendant argued that because the claim was only allocated to the fast track because of the personal injury claim (which had failed), and that otherwise it would have been allocated to the small claims track, the order should be:
i. That the Claimant pay the Defendant’s cost of the personal injury claim and that the Claimant should recover only small claims costs in respect of the credit hire claim; or
ii. That alternatively the Defendant pay the Claimant’s cost limited to small claims costs.

On the question of allocation, the Judge reaffirmed that individual parts of a claim cannot be allocated to different tracks – so the whole claim was, and remained, allocated to the fast track. The Judge considered that the claim could have subsequently been re-allocated but noted that no such application had been made. The position was clear: “it was the personal injury element of the claim which was the reason why the claim was allocated to the fast track. If there had not been the personal injury claim, the claim for the other losses would almost certainly have been allocated to the small claims track…”.

The Judge considered that the general rule, over-arching the Court’s general discretion as to costs, is that the unsuccessful party will be ordered to pay the cost of the successful party (CPR 44.2(2) – usually expressed as ‘costs follow the event’). The Claimant was the successful party on the basis that “it is the Defendant who is writing the cheque”. On this basis, the normal rule, in this case, would be that fixed costs pursuant to CPR 45.29B will apply unless the court should make “a different order”.

The Court considered the interplay between fixed costs and the power to make “a different order”, finding that the object of fixed costs is to provide certainty such that exercising a power to make “a different order” should be exercised with caution.

The Judge found that “where a case has in fact been allocated to a particular track and has succeeded, to deprive the successful party of the costs normally awarded simply because the level of damages in fact fell ultimately below the threshold of the track is, again, not an automatic reason to depart from the normal rule”.

The Claimant was awarded fixed costs pursuant to CPR 45.29B.

Conditional Costs Order, guidance on the calculation of interim payments on account of costs

In Orexim Trading Ltd v Mahavir Port and Terminal Private Ltd (Costs) [2019] EWHC 2338 (Comm) the Claimant applied to strike out the Defendant’s defence for failure to comply with directions. The application resulted in a peremptory “unless” order, compelling the defendant to comply with directions, failing which judgment (in excess of $7m) would be entered.

The Claimant sought a payment on account of its costs pursuant to CPR 44.2(8): “Where the court orders a party to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs, unless there is good reason not to do so”.

Noting that the Claimant’s costs, of £410,004, excluding the costs of the strike-out application, were within the approved budget, the judge set out the approach to ascertaining the level of a payment on account. Citing McInnes v Gross [2017] EWHC 127 (QB):

  • The approved costs budget is the starting point for the calculation
  • CPR 3.18 provides that “the court will… not depart from such approved or agreed budget unless satisfied that there is good reason to do so”
  • In McInnes the court reduced the approved budget by 10% “which I regard as the maximum deduction that is appropriate in a case where there is an approved costs budget”.

Using this approach, the Judge calculated 90% of £410,004 (£369,003). Indemnity costs had not been ordered (as “the Defendant can[not] be said to have behaved so unreasonably as to justify [such an] order”). Therefore, “a slightly lower figure should be adopted” and the Judge ordered that, if the unless order is not complied with, an interim payment of £350,000 should be paid within 28 days of judgment being entered.

The Claimant was awarded, in addition, its full costs of the application.

Summary assessment: hourly rates

A High Court judge has urged a review of the guideline hourly rates, which were fixed in 2010, saying the current levels are “not helpful in determining reasonable rates in 2019”.

In Ohpen Operations UK Ltd v Invesco Fund Managers Ltd [2019] EWHC 2504 (TCC) Mrs Justice O’Farrell assessed costs of the Defendant’s successful application for a stay pending compliance with an agreed dispute resolution procedure.

The incidence, basis and assessment of costs was determined on paper, each side exchanging short written submissions. There was no dispute as to the applicable principles:

• The Court has discretion as to whether costs are payable by one party to another, and as to their amount: CPR 44.2(1);
• The general rule is that the unsuccessful party will pay the costs of the successful party: CPR 44.2(2); and
• The Court will have regard to all the circumstances, including conduct of the parties and any offers: CPR 44.2(4) & (5).

The parties agreed that the Claimant should pay the Defendant’s costs, summarily assessed on the standard basis. As such:
i. the Court will allow costs which have been reasonably incurred and are reasonable in amount, resolving any doubt in favour of the paying party: CPR 44.3(1) & (2); and
ii. the Court will only allow costs which are proportionate to the matters in issue: CPR 44.3(2).

No issue of proportionality arose.

On the issue of hourly rates, the Judge said “The [SCCO] guideline rates are significantly lower than the current hourly rates in many London City solicitors, as used by both parties in this case. Further, updated guidelines would be very welcome”.

The Judge found that “the technical nature of the dispute justifies the engagement of solicitors with the appropriate skill and expertise to ensure proper and efficient conduct of the litigation” and that “Solicitors providing such skill and expertise are entitled to charge the market hourly rate for their area of practice”.

The Defendant’s costs (of the application for a stay) were £52,152. The Judge assessed costs, on the standard basis, at £46,000. In doing so the Judge noted that Grade A and Grade D time was limited and reasonable (without indicating the respective hourly rates). In reducing Grade B and Grade C time, the Judge indicated that she was allowing hourly rates of £655 and £455 respectively.