Another keenly awaited judgment from the Court of Appeal has, this time, proved a resounding success for Defendants. It concerns three appeals relating to the question of how the court should approach the assessment of costs in low value personal injury claims which involve children and settle prior to the commencement of proceedings, therefore requiring approval proceedings. The crux of the dispute is whether the value of the claim is such that the small claims track would have been the normal track for that claim had the claim been issued and, depending on that decision, what is the appropriate course of action. The Court of Appeal also, in a related Appeal, looked at when it is appropriate to instruct counsel on an infant approval hearing following settlement under CPR 45 Part II. Steven Dawson, Head of Costs, reviews the decision.
An infant approval claim is issued under Part 8, and a Part 8 claim cannot be a small claim. It is treated as being allocated to the multi-track under CPR 8.9(c). The choice of applicable costs regimes therefore is between the fixed recoverable costs regime (in motor claims) in CPR 45 Part II and the general provisions of CPR Part 44.5.
The Court of Appeal considered three issues:
Do the costs fall within the fixed recoverable costs regime under CPR 45?
CPR 45.7 sets out the scope of the fixed recoverable costs regime in road traffic cases. In terms of value, the regime applies to cases with a value of up to £10,000 and where "if a claim had been issued for the amount of the agreed damages, the small claims track would not have been the normal track for that claim": see CPR 45.7(2)(d).
An important question then was the meaning of the word "claim" and it was held to be the claim that would have been issued (had it not been compromised) for damages in the amount at which they were eventually agreed. It does not mean the Part 8 claim for approval brought pursuant to CPR 21.10(2).
Therefore, if the agreed personal injury damages do not exceed £1,000, the claim falls within the small claims track limit and the costs fall for detailed assessment under CPR 44.5 and not within the fixed recoverable costs regime.
If the claim falls within the small claims track, how then are they to be determined?
How should the court carry out a detailed assessment in these circumstances? For the avoidance of doubt, (although the Defendant did not actually argue this) the court cannot simply limit the claimant's costs to what is recoverable under CPR 27. The obligation is still to decide whether the costs claimed were proportionately and reasonably incurred, or were proportionate and reasonable in amount.
However, following the Court of Appeal's reasoning in O'Beirne v Hudson (2010) the court should give very anxious scrutiny to claims for costs above the level of what is recoverable under CPR 27 to ensure that only reasonable costs, proportionate to the size and complexity of the claim are recoverable.
The correct approach is to ask whether the damages claim and therefore its compromise was sufficiently complex to justify the engagement of solicitors beyond the production of a report on the merits of the settlement or in respect of any other step in the proceedings, and to scrutinise the bill on that basis.
A discrete issue: whether the fees of counsel to attend an approval hearing are "necessarily incurred by reason of one or more of the claimants being a child or protected party" under CPR 45.10(2)(c)?
The outcome of this age-old thorny dispute is that the fees of counsel will only be recoverable if they had to be incurred because of the special status of the claimant. "Necessarily" imports a causal link which is not established merely by considerations such as counsel being more competent or better equipped to deal with a hearing than a local agent, or that they would help remove the stress of the occasion. There must be some complexity in the case to justify counsel's attendance at the approval hearing.
Of course, the costs of instructing counsel to provide the opinion required under 21PD 5.2 will ordinarily satisfy the test because they are a specific requirement of approval proceedings.
The Court of Appeal was conscious that a consequence of the ruling might be to discourage solicitors from taking on approval proceedings involving small claims, as they are now unlikely to be able to recover their costs. Nevertheless, Patten LJ considered a normal multi-track assessment to be counterintuitive to the provision in CPR 45.7(2)(d) and if the fact that the fixed recoverable costs regime does not apply to allclaims under £10,000 produces a difficulty in practice, then the Rule Committee will need to think again.
This case has far-reaching implications. In relation to all cases where the amount of settlement would have put the matter squarely within the small claims track it is open to paying parties to argue that it was not appropriate to engage a solicitor and therefore costs should be assessed accordingly. This is especially true if the small claims limit is extended for non personal injury elements. The Court of Appeal has referred to a number of previous judgments on this issue and has given them considerable weight. Therefore, solicitors should be extremely cautious when considering whether to take on a case that may have a value commensurate with the small claims track.This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.