Date 30 April 2009
Welcome to the April issue of Stay Alert.
In this edition, we bring you up to date on recent developments in Commercial Litigation and cover the following articles:
- Civil Procedure Rules 2009 (“CPR”) and the first cost capping case
Changes to the CPR and practice directions came into force on 6 April 2009 and readers can refer to our January and February editions of Stay Alert! for further information.
Interestingly, in the first case to be decided under the new costs capping rules, Mr Justice Eady recently declined to grant a costs capping order - Peacock v MGN Ltd [2009] EWHC 769 (QB).
- Postponement of interest liability
On 22 April 2009, in the case of Colour Quest & others v Total Downstream UK and others [2009] EWHC 823 (Comm)[2009] All ER (D) 152 (Apr), Mr Justice David Steel delayed the running of interest on costs for 6 months, partly due to the court rate almost amounting to a penalty, compared to the current bank base rate.
- ADR: Helping the government to cut costs
A report published this month shows that the government’s use of ADR continues to save costs.
- Access to Justice
An update on our November issue of Stay Alert! in relation to regional centres of the Administrative Court.
We hope that you find this edition of Stay Alert! useful and interesting. We value your opinions and always welcome any comments you may have. If you have any feedback on this edition or any suggestions on what you would like us to cover in future, please email Clare Mackay – clare.mackay@salaw.com. We look forward to hearing from you.
1. Civil Procedure Rules 2009 (“CPR”) and the first cost capping case
Changes to the CPR and practice directions came into force on 6 April 2009. The main amendments relate to the introduction of a new practice direction for pre-action behaviour, the introduction of cost capping orders and the raising of the financial limit of the fast track to £25,000.
We have already written extensively about the topic and readers can refer to our January and February editions of Stay Alert! for further information.
Interestingly, in the first case to be decided under the new costs capping rules, Mr Justice Eady recently declined to grant a costs capping order - Peacock v MGN Ltd [2009] EWHC 769 (QB).
In this case, the defendant, MGN Ltd, was worried about the level of costs it would be liable for if it lost the case. A 100% uplift on the claimant’s solicitors Conditional Fee Agreement (“CFA), the after-the-event insurance premium and estimated costs at the end of trial of £1million were all factors which MGN Ltd considered when it applied for a costs capping order.
The Law
CPR 44.18 (1) and (2) state:
“(1) A costs capping order is an order limiting the amount of future costs (including disbursements) which a party may recover pursuant to an order for costs subsequently made.
(2) In this rule, ‘future costs’ means costs incurred in respect of work done after the date of the costs capping order but excluding the amount of any additional liability.”
CPR 44.18 (5) states:
“(5) The court may at any stage of proceedings make a costs capping order against all or any of the parties, if –
(a) it is in the interests of justice to do so;
(b) there is a substantial risk that without such an order costs will be disproportionately incurred; and
(c) it is not satisfied that the risk in sub-paragraph (b) can be adequately controlled by –
(i) case management directions or orders made under Part 3; and
(ii) detailed assessment of costs.”
The Decision
The court considered only base costs, hourly rates and the suitability of instructing two leading counsel. It was said that additional liabilities, such as the success fee under the CFA and the insurance premium, should be disregarded when making a decision on a costs capping order, as per CPR 44.18(2).
The Judge said that the new rules required that costs capping orders be “exceptional” and that there be a risk of disproportionality. He concluded that this was not the case here and that costs could be controlled by the costs judge on detailed assessment.
2. Postponement of interest liability
Under the Civil Procedure Rules 2009 (“CPR”) interest starts to run from the date judgment is given unless, either a different provision of the CPR applies, or the court orders otherwise (CPR 40.8).
On 22 April 2009, in the case of Colour Quest & others v Total Downstream UK and others [2009] EWHC 823 (Comm)[2009] All ER (D) 152 (Apr), the claimants' total costs were in the region of £16million.
In relation to the rate of interest, Mr Justice David Steel said: “The Judgement Act rate is of course 8%. Given the present and anticipated level of bank rate this is by any standards generous if not penal (although it had previously been 15% from 1985 to 1993). However the rate as such is not open to variation by the Court: Thomas v. Burn [1991] 1 AC 362.”
The Judge concluded that “justice requires a postponement of the liability for the interest until a later date” and the “starting date should be extended to 6 months from today”.
As this case was “very much out of the norm” it was necessary to delay the start of interest running.
3. ADR: Helping the government to cut costs
On 23 March 2001 the government made a pledge that “Alternative Dispute Resolution (ADR) will be considered and used in all suitable cases wherever the other party accepts it”. A report published this month shows that the government’s use of ADR continues to save costs.
The report shows that ADR has been used in 374 cases with 271 leading to settlement. This 72% settlement rate is 4% higher than the previous year and a saving of costs of £26.3 million is estimated.
The report lists some interesting illustrative cases from different departments including: Ministry of Defence, Her Majesty's Revenue and Customs, Department for Environment, Food and Rural Affairs, Department for Works & Pensions, Department for Health, Treasury Solicitors and the National Health Service Litigation Authority.
4. Access to Justice
In our November issue of Stay Alert! we highlighted plans to open regional centres of the Administrative Court.
The Court Service has now announced that from 21 April 2009 it is possible to issue most Administrative Court proceedings at the District Registry of the High Court at Birmingham, Cardiff, Leeds or Manchester as well as at the Royal Courts of Justice in London. For location details please click here.
If you have any questions or require further information please contact Clare MacKay by email at clare.mackay@salaw.com or on 01727 798000.
© SA Law 2009
Every care is taken in the preparation of our articles. However, no responsibility is accepted as being owed to any person or organisation who acts on the basis of information contained in them. You should obtain specific advice in respect of individual cases.