The case of Crane –v- Canons [2007] EWCA Civ 1352 has dealt with the issue of whether fees charged by costs consultants are profit costs or disbursements. This issue is relevant to the amount of costs that can be recovered in certain cases as it is the basis for whether a success fee can be charged for the work carried out by costs consultants where solicitors are instructed on a conditional fee basis.
In its decision the Court held that the fees charged by costs consultants in relation to the assessment proceedings were profit costs and that under the collective conditional fee agreement a success fee was recoverable on those costs.
May LJ started by describing the case as “having an unsavoury flavour to it” but in his leading judgment he considered the wording of claimant’s collective conditional fee agreement and the case law in relation to whether work done was a profit cost or a disbursement.
He endorsed Master Hurst’s view that the “characteristic of whether charges of a person engaged by solicitors are profit costs or disbursements is whether the solicitors have a personal responsibility to the client for work done”. He went on to find that the work carried out by the costs consultants was essentially solicitors’ work and although the claimant’s solicitors chose to delegate that work, they retained control and supervision. In those circumstances the costs draftsman was effectively acting as the solicitors’ temporary employee and the solicitors remained liable to the client for any negligence in the conduct of the costs assessment. The Court therefore held that a success fee was recoverable on the work carried out by costs consultants on behalf of the claimant’s solicitors.
The Court also gave consideration to the submission that there should be a reduced success fee for work carried out in relation to costs only proceedings to reflect the lower risks of costs only proceedings. Again, the Court of Appeal rejected this proposition and at paragraph 21, May LJ stated:
“There is no reason of principle which compels the court to require parties who enter into CFAs to address at the outset the risk of costs proceedings separately and in my judgment there are clear reasons of policy for the court not to require this. There is a general sense if CFAs are to be a substantial means of financing civil litigation that they should not be overcomplicated, that costs should be agreed wherever possible, and that, if there to be contest costs proceedings, the means whereby the winning solicitors finances litigation which he loses should extend to the costs proceedings at the same rate as the proceedings themselves.”
Claimant solicitors need to bear this case in mind when drafting and checking bills of costs. Where claimant solicitors are acting under a conditional fee agreement and a costs consultant has been instructed to carry out the solicitors’ work for which the claimant’s solicitors remain responsible a success fee can and should be recovered.
Defendant solicitors also need to be mindful of this decision where calculating Part 47.19 offers and more broadly when considering the risks of continuing to a detailed assessment hearing.
More generally May LJ’s comments at the commencement of his judgment are reminiscent of previous comments regarding satellite litigation and the description of costs litigation as a “blot on the civil justice system” (Latham LJ in Burnstein –v- Times Newspapers [2002] EWCA Civ 1759). This should serve as a reminder to all parties that the courts do not look kindly upon satellite litigation regarding costs, particularly when damages are low, as in this case (a settlement of £1,500).
Kirsty McKinlay
24 January 2008
Young Street Chambers
Kirsty McKinlay is a tenant at Young Street Chambers in Manchester specialising in the areas of personal injury, clinical negligence and costs.
Young Street Chambers civil clerks Paul Reeves and Rachel Campbell can be contacted by telephone on 0161 833 0489 or by email:
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