Hanley v Smith & Anor, Court of Appeal - Supreme Court Cost Office, June 17, 2009, [2009] EWHC 90144 (Costs)

Resolution Date:June 17, 2009
Issuing Organization:Supreme Court Cost Office
Actores:Hanley v Smith & Anor


Neutral Citation Number: [2009] EWHC 90144 (Costs)

Claim No. HQ05X01554

SCCO Reference CCD 0605404



Supreme Court Costs Office

Clifford's Inn



Date: 17 June 2009

Before :

Deputy Master Victoria Williams

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Between :

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Mr Sydney Chawatama (counsel instructed by Julie Reynolds Solicitors) for the Claimant

Mr David Cooper (Costs Draftsman instructed by Greenwoods Solicitors) for the Defendants

Hearing date : 22 April 2009. Handed down 17 June 2009

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  1. This is my judgment on two issues forming part of the points of dispute in this detailed assessment of the Claimant's Bill. The underlying case is a personal injury claim arising from a motorcycle accident on 30 June 2003 in which the Claimant was a pillion passenger who sustained head and other injuries. The driver was the First Defendant who was uninsured. The case was a complex one. Mr Hanley suffered closed head injuries, was in a coma for 3 months and was `sectioned' under the Mental Health Act. He was kept in residential care with a comprehensive care regime and not permitted to travel (such as to expert appointments) without being accompanied by a nurse or similar carer. He was not well enough to give evidence in his own case or to give adequate instructions and was a Patient throughout.

  2. I will not summarise all issues in this technically difficult case but a flavour can be gleaned by considering that (at various stages) there were issues as to whether the motorcycle suffered from a latent defect such as would afford some defence to the First Defendant, whether the Claimant was knowingly allowing himself to be driven by an uninsured driver so as to render him ineligible for MIB cover (it also being alleged that the First Defendant was connected to the Claimant via a shared drug habit), whether the Claimant's pre-existing serious conditions including epilepsy and a history of hepatitis due to drug use would have meant he would have needed care irrespective of the accident, whether following the accident his condition was so serious that he would probably never be released from compulsory Section under the Mental Health Act (affecting the extent of his need for damages relating to care), and to what extent (if he was ever released from residential section) there would be State funding for aspects of care also affecting a possible damages award. One of the other issues as to quantum was the question of life expectancy, which impacted upon future care needs.

  3. The case proceeded at first on a standard retainer from April 2004 to 5 March 2006. Thereafter the solicitors acted under a Conditional Fee Agreement from 6 March 2006 onwards. As at the date of entry into the solicitor's CFA the issue of negligence and liability as against the first defendant (the driver) had been resolved but not the extent of liability in percentage terms, or quantum, and nor had the question of eligibility for MIB cover been established (eligibility was in dispute on the basis that Mr Hanley was said to have known that the driver was uninsured). Junior counsel also acted under a CFA, with his CFA being dated 1/3/06. After the dates of solicitor and junior's CFA's, the issues of apportionment and eligibility settled shortly before a planned trial of the eligibility issue, on the basis of a 70% liability to be paid by the MIB and an order was made on 20 March 2006.

  4. The case then proceeded as to quantum. Leading counsel was brought in (ultimately acting under a CFA, dated 10/10/07) for the quantum stage of the case after issues of eligibility and liability had been resolved but at a stage where life expectancy was significantly in issue and had been the subject of a Defendant's Part 36 offer. The expected extent of State care of and the extent to which Mr Hanley would need to remain `sectioned' under the Mental Health Act also both remained very much at large along with the over all quantum of the case.

  5. Directions were made and substantial expert evidence obtained on both sides. There was intensive work with the experts on the part of the representatives for Mr Hanley. Leading counsel was I understand experienced in cases involving disputes about the extent of State funding of care. Ultimately at a joint settlement meeting an agreement was reached subject to court approval, for damages in the sum of £1.9m plus costs to be assessed on the standard basis if not agreed. The Court approved the settlement which was supported by advice by leading counsel.

  6. The CFA agreements for solicitors and counsel each assumed risks arising from rejection of Part 36 offers. If the Claimant rejected a part 36 offer on advice, and later failed to beat that offer, the solicitors would not be entitled to fees after the latest date for acceptance of the offer. Junior and leading counsel's CFA's provided that in such a circumstance all counsel's fees would be forfeited for the period after receipt of the notice of payment or offer.

  7. Success fees were specified in the solicitor's CFA at 100% (expressed as an overall success fee of 100% but with 10% of that figure representing cost of postponement of charges not claimable from the Defendants so that the claimed success fee in the Bill was 90%.) Leading counsel's CFA provided a success fee of 82% and Junior counsel's CFA provided a two stage success fee namely 50% rising to 100% if a trial brief had been delivered. I also had a note from leading counsel Mr Martin QC on the question of success fee and heard unsworn evidence from the solicitor for the Claimant who was questioned about the correct interpretation of the risk assessment documentation from which her firm's success fee was derived.


  8. There are two issues before me. The remainder of the assessment has been concluded subject to those issues. They are as follows:

    (1) Whether the Claimant should be entitled to interest on costs under the Judgments Act 1838 s.17 from date of approval of the settlement.

    (2) What level of success fees are appropriate in this case for solicitors and for leading and junior counsel.

  9. I was assisted on the above two issues by hearing argument from Mr Chawatama for the Claimant and from Mr Cooper for the Second Defendant. Both produced skeletons.

    (1) Interest on costs

  10. The argument as to the date from which interest was claimed had been simplified by the concession by the Claimant that interest was claimed only from date of approval of the settlement. That reduced the point to two issues:

    (i) Did the court have a discretion under s.17 of the Judgments Act 1838 as amended, to adjust the interest awarded to reflect the actual extent to which the Claimant had an obligation to pay interest or had actually been kept out of his money by having had to make any interim payments to his solicitors as opposed to simply awarding interest on the bill as a whole?

    (ii) If the court did have such a power was it appropriate to exercise it to disallow interest in this case to reflect the fact that Mr Hanley had not been actually out of pocket since he had not paid costs to his lawyers but had been represented under a CFA?

    Defendant's position

  11. On the question whether the court did in principle have a discretion to order otherwise than that interest must run from date of the judgment order, Mr Cooper referred me to Powell v Herefordshire HA [2003] Costs LR185. On the facts in Powell the Master had held himself bound to allow interest from the date of judgment on liability with quantum to be assessed, and costs, (in 1994) rather than from the much later date (6 years later in 2001) when quantum issues were resolved and the final judgment was obtained. The Appeal Court held (between paras. 3 and 13 which I need not quote) that the costs judge in that case had not been `in a legal straightjacket' (an expression used in para. 11 of judgment) requiring him to order interest from the original judgment date, because CPR 44.3(6)(g) to which the Master had not been referred provided that a court had the power to order that interest shall run from or until a certain date.

  12. Mr Cooper stressed that the effect of Powell was that the court could therefore allow interest from a date after judgment if it was just to do so. That was he said the effect of the wording of s.17 of the 1838 Act as amended coupled with the text of rule 44.3(6)(g) and the interpretation of that rule by the Appeal Court in Powell. He accepted that the statutory interest rate of 8% had not been altered despite changes in Bank of England base rate.

  13. I was referred also to CPR 40.8 which was to the effect that where interest is payable under s.17 of the 1838 Act, interest ``shall begin to run from the date that judgment is given'' unless a rule or practice direction made different provision or the court ordered otherwise, and that the court ``may order that interest shall begin to run from a date before the date that judgment is given''.

  14. It was therefore said that I could order that interest should start from a later date than judgment if the claimant had in fact been kept out of money only from a later date because or (if there was uncertainty as to actual date(s) of any interim payments) I could direct that an overall reduced rate should be allowed (AMEC Process & Energy Ltd v Stork Engineers & Contractors BV [2002] EWHCB1 (TCC) was mentioned in that regard). It was accepted that if the Claimant had actually made interim payments on account of fees to his own lawyers prior to judgment then he would be entitled to Judgments Act interest on those sums because he would be actually out of pocket.

  15. However Mr Cooper argued that it would not be just to allow the claimant or his solicitors to recover interest for periods for which Mr Hanley was not actually out of pocket, and second that it would be unjust to allow...

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