Claimant's Application for Costs Order and Interim Payment Dismissed

The High Court has reminded claimants seeking orders for costs and interim payments partway through proceedings that timing and security for defendants’ costs are decisive factors.

In NAX (a protected party via his wife and litigation friend JAX) v (1) MAX (2) Liverpool Victoria General Insurance Group Limited [2021] EWHC 3492 (QB), the claimant suffered serious injuries in a motorcycle accident on 02/07/17, including head injury, multiple fractures and below-knee amputation of the right leg. Solicitors were instructed to bring a claim for damages funded via conditional fee agreement with ATE insurance providing for an indemnity for adverse costs and the claimant’s disbursements up to £100,000. Primary liability was admitted allowing for judgment to be entered on 19/01/21 with contributory negligence, causation and quantum to be decided. The allegations of contributory negligence centred on a failure to wear suitable protective footwear and to wear a properly fitted or adjusted/securely fastened helmet. The Provisional Schedule of Loss sought damages close to £8m. Costs budgets were exchanged with the claimant’s Precedent H totalling £1,228,768.92 and the defendants’ £494,819.30.

The defendants made a number of pre-issue offers: (i) an offer dated 16/01/19 to deal with liability on an 85:15 basis in the claimant’s favour in respect of injuries caused or contributed to by reason of the alleged failure to wear a properly secured helmet; (ii) a Part 36 offer dated 04/07/19 of 75:25 on liability in favour of the claimant; and (iii) a Part 36 offer dated 04/07/19 to settle the whole of the claim for damages in the sum of £1.5m gross of interim payments and deductible benefits.

At the first CCMC (which took place on 17/12/20 and 14/01/21), the claimant invited the court to make: (i) an order for costs of the action down to 08/02/19; (ii) an additional order for costs relating to quantum issues between 09/02/19 and 29/07/19; (iii) a further (prospective) order for outstanding costs of the action from 09/02/19 (which were said to be costs in the case to be agreed or determined by the court at a later hearing); and (iv) a payment on account of such costs in the sum of 70%.

Although not contesting the jurisdiction of the court to make such orders, the defendants resisted any costs order(s) and interim payment in view of the live issues surrounding liability, the early stage of the consideration of quantum issues and the pre-issue Part 36 offers. The decisive factors in determining the application were identified by the court as:

• Disclosure and expert evidence was at an early stage such that there was no clear ascertainment of the extent and nature of the effects of the head injury – still less any prognosis.
• There was scope for substantial challenge to many of the associated items of claim for past losses, including the costs in principle associated with the appointment of a deputy.
• If a PPO were made in respect of future losses, it would not be immediately available to meet by way of set-off the payment of an award of costs in favour of the defendants.
• In cases where there are or remain issues of liability, there is greater potential for issues based or conduct based costs orders at conclusion of the case.
• The reference in the Serious Injury Guide to “resolution of liability” was not likely to cover the situation where primary liability only had been resolved; but in any event, the Guide could not be relied upon as the basis for making an order which was not appropriate under the CPR.
• There was good reason not to make such orders if the effect of doing so would diminish the security in respect of a potential future set-off of the defendants’ costs against costs or damages due to the claimant.
• It was not clear to the court that indemnity under the ATE policy would be available or sufficient to meet the defendants’ costs if the same indemnity was used to cover the claimant’s own disbursements.
• The court could not be satisfied to the high degree of confidence necessary that the trial judge would not consider it appropriate to make a different costs order, or at least one which was not consistent with the order(s) being urged upon the court by the claimant.
• Although the trial judge could set aside any costs orders made, this was not a desirable course of action due to the risk of future time-consuming and costly applications.

Consequently, Master Brown concluded that even if the court was persuaded to make the order(s) sought by the claimant, the effect of making an interim payment would be to diminish security for the defendants’ costs. The claimant’s application was, therefore, dismissed with costs.

Keoghs comment

This judgment was handed down in private on 17/02/21 because of the references to without prejudice material. Now the claim has been concluded and the compromise approved by the court, the judgment has been formally handed down in public pursuant to an order of Master Davidson dated 21/12/21 and with the agreement of the parties.

There have been several cases of note over the last few years dealing with interim payments on account of costs during the life of a claim and at conclusion via Part 36 offer and acceptance. These decisions impact insurers and compensators, particularly where claims may run for many years on the question of quantum. Jurisprudence now demonstrates a willingness to entertain applications for costs orders and interim payments on account of costs before final resolution of damages. With the advent of costs management and approved budgets, details of the parties’ costs are available to the court at a much earlier stage in the litigation.

Notwithstanding the potential for such applications to become a satellite industry and increase overall claims spend, the opportunity exists to bring matters of conduct and other complaints to the attention of the court such as: the need for additional directions, issues surrounding slippage in the timetable, a failure by the claimant to engage in the process, untimely or incomplete rolling disclosure of records and reports, etc.

Each case turns on its own facts. A joined-up approach between claims handlers, lawyers and costs professionals is essential to ensure insurers and compensators are not exposed to untimely, unreasonable and opportunistic applications that are insufficiently evidenced. As the High Court has demonstrated in this careful and considered judgment, there are many factors that must be weighed in the balance should claimants seek to invoke the court’s jurisdiction and discretion to make an order for costs and interim payment before the final outcome of the claim is known. Keoghs remains committed to working closely with their clients to contain and control claims spend throughout the whole of a case.