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Will we or won't we get our costs back?

Tom Holbrook congratulates litigators on making it to 2015 after a tough Mitchell-centric year

27 January 2015

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With New Year's resolutions abounding, I stepped into the office fashioning a rather 'loud' new tie, which
my son took great delight in handing to me on Christmas Day. In addition, I had my 'standard present' of new
socks from my mother, which, although received with the enthusiasm one would expect, did provide that little extra spring in my step. A little sturdier than when I started December, and slightly concerned a work colleague
had bought me a pilates lesson,
I vowed I would be a little more flexible this year.

Now, I am not going to preach that all is right with the world however, if I reflect as I ease myself onto my chair, which sinks slightly lower following the Christmas excesses,
I find myself, as a litigator, in somewhat calmer waters than
I had been at the advent
of 2014.

If you cast your mind back
to January 2014, litigators were erring on the side of extreme caution due to the Mitchell effect, coming to terms with costs budgets, the abolition of recoverability of success fees, and qualified one-way costs shifting (QOCS) - a term some clients still find amusing - all of which could have been replaced with the "what, so we will not get our costs back?" rule. Although change is always received with concern, the general feeling was instability as courts stretched to their very limits and then, with the wider changes of alternative business structures, there was a sense that 2014 was going to be difficult.

Denton decisions


As 2014 progressed, it slowly steadied an uncertain ship, with Denton v T H White Limited [2014] providing some certainty as to what was a 'trivial breach'.
The decision to allow parties
to agree extensions of time for directions, without recourse to the court, by way of application pursuant to the civil procedure rules (CPR) 2.11, was mature
and pragmatic.

Cases in December 2014 (R (on application of Dinjan Hysha)
v Secretary of State for Home Department Fathollahipour
v Aliabadibenisi and May
v Robinson [2014]) demonstrated that although the court expects parties to take a robust stance
on directions, they should not be encouraged to refuse reasonable extensions of time or seek to take tactical advantages.

In terms of the "what, so we will not get our costs back?" rule, we entered into the world of fraud (or not) and the meaning of the term 'fundamentally dishonest'.
In Gosling v Hailo & Screwfix
Direct [2014], His Honour Judge Moloney QC found "two levels
of dishonesty: dishonesty in
relation to the claim which is
not fundamental, so as to
expose such a claimant to costs
liability, and dishonesty which is fundamental, so as to give rise to cost liability". In that case,
it was court surveillance
that questioned the value of
the claim and the claimant's statements to the experts.
The claimant was found to
be fundamentally dishonest. However, the test is a difficult one.

In the catastrophic injury sector, we faced medical and technical innovations, making this a continually challenging field. New heads of damages emerged and established heads of damages were re-engineered. Costs budgeting was bedding in and, in some circumstances, led to a dramatic reduction in costs. A drop-off in litigation was seen, with substantial case costs being incurred prior to court involvement, so the court
could not assess the costs retrospectively. Some solicitors also diversified into claims services such as rehabilitation services. It made for interesting times.

We in litigation may, in part, be on the brink of more certain times procedurally. However, with the outcome of the discount rate review awaited in 2015 as well as the progression of the Ministry of Justice claim portal and the restrictions in fees, a litigator may consider
or question where our role
now lies. But, as ever, the
legal profession will see these challenges through and meet them head on. So, 2015 is not
a time for dwelling on the past, but for New Year's resolutions. Seeking to be more innovative, intelligent, and offering our clients solutions which, in
years gone by, may have been unthinkable. Oh, and maybe more exercise, eating slightly less and having one less glass
of wine. SJ

Tom Holbrook is a partner at Kennedys

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