Thomas Joseph Marbrow v Sharpes Garden Services Ltd
| Jurisdiction | England & Wales |
| Judge | Gordon-Saker |
| Judgment Date | 10 July 2020 |
| Neutral Citation | [2020] EWHC B26 (Costs) |
| Date | 10 July 2020 |
| Docket Number | Case No: SC-2020-BTP-000327 |
| Court | Senior Court Costs Office |
[2020] EWHC B26 (Costs)
IN THE HIGH COURT OF JUSTICE
SENIOR COURTS COSTS OFFICE
Royal Courts of Justice
London, WC2A 2LL
SENIOR COSTS JUDGE Gordon-Saker
Case No: SC-2020-BTP-000327
Miss Michelle Walton (instructed by Barratts Solicitors) for the Claimant
Mr Simon Gibbs (of Gibbs Wyatt Stone) for the Defendant
Hearing date: 7th July 2020 (by Microsoft Teams)
This judgment was handed down remotely by circulation to the parties' representatives by email and release to Bailii. The date and time for hand-down is deemed to be 4 pm on Friday 10 th July 2020
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
SENIOR COSTS JUDGE Gordon-Saker
This judgment:
i) sets out the reasons for my decisions that the caps on recoverable costs provided by sub-paragraphs 7.2(a) and (b) of Practice Direction 3E of the Civil Procedure Rules 1998 exclude value added tax;
ii) sets out my decision on the Claimant's claim at item 481 of his bill for £2484.48 in respect of interest paid under a disbursement funding loan; and
iii) sets out my decision on the Defendant's contention that the Claimant's entitlement to interest should run from 3 months after the date of the order for costs.
The Claimant is entitled to the costs of his claim for damages for personal injuries arising from an accident at work on 4 th July 2016. He was engaged in trimming a hedge with a petrol driven hedge cutter. For reasons which remained in dispute between the parties, the hedge cutter came into contact with the Claimant's left hand, causing him significant injuries. The Claimant instructed Barratts Solicitors of Nottingham under a conditional fee agreement to bring a claim against the Defendant, his employer. Proceedings were issued in the Queen's Bench Division. Liability was disputed and remained in dispute until the claim settled in December 2019, shortly before trial. The terms of settlement provided that the Defendant should pay the Claimant's costs of the action on the standard basis.
The detailed assessment of those costs was heard on 7 th July 2020 by video and, save for the issues reserved to this judgment and the summary assessment of the costs of the detailed assessment proceedings, was concluded on that day. I am grateful to Miss Walton, on behalf of the Claimant, and Mr Gibbs, on behalf of the Defendant, for their efficiency in dealing with not only a paper bill, but also an electronic bill, with the original solicitors' files lodged in support of the bill in hard copy adumbrated by an electronic bundle of key documents.
Whether the caps on recoverable costs provided by sub-paragraphs 7.2(a) and (b) of Practice Direction 3E of the Civil Procedure Rules 1998 exclude value added tax
Paragraph 7.2 of Practice Direction 3E provides:
Save in exceptional circumstances—
(a) the recoverable costs of initially completing Precedent H shall not exceed the higher of £1, 000 or 1% of the total of the incurred costs (as agreed or allowed on assessment) and the budgeted costs (agreed or approved); and
(b) all other recoverable costs of the budgeting and costs management process shall not exceed 2% of the total of the incurred costs (as agreed or allowed on assessment) and the budgeted (agreed or approved) costs.
The present case was subject to a costs management order. The Claimant's budget was approved at a costs and case management conference and the Defendant's budget was agreed. It is not contended by the Claimant that there any exceptional circumstances such as to enable him to escape the caps.
The Defendant contends that the caps of £1, 000 or 1% in sub-paragraph 7.2(a) and 2% in sub-paragraph 2(b) must be inclusive of value added tax because it is not expressly stated to be otherwise. Neither Miss Walton nor Mr Gibbs was able to point me to any decision directly on the point apart from my own decision in BP v Cardiff & Vale University Local Health Board [2015] EWHC B13.
Mr Gibbs described that decision as “brave” because I had imported words into the rule which were not there, presumably, in each sub-paragraph: “excluding value added tax”. He preferred the approach taken by His Honour Judge Hacon in Response Clothing Limited v The Edinburgh Woollen Mill Limited [2020] EWHC 721 (IPEC). There the court was concerned with the interpretation of rule 45.31(1) of the Civil Procedure Rules which provides that, in certain proceedings in the Intellectual Property Enterprise Court, the court will not order a party to pay total costs “of more than … £50,000 on the final determination of a claim in relation to liability”. The issue was whether that sum included or excluded value added tax. It would appear that a factor in the learned judge's decision was that the “total costs” capped by r.45.31(1) did not fall within the definition of “scale costs” provided by r.45.30(4). That r.45.31(5) provided that “VAT may be recovered in addition to the amount of the scale costs” but made no provision for value added tax on “total costs”, “coupled with the unambiguous wording of rule 45.31[(1)](a)” suggested that the £50,000 cap on total costs did not exclude value added tax.
My decision in BP was not intended to be brave nor did I intend to import any words into the rule, because, quite simply, it was not necessary for me to do so. This is clearly not a case where there is an obvious drafting error and equally clearly it does not fall to me to exercise the court's exceptional jurisdiction to put right any such error, as described in Inco Europe Limited v First Choice Distribution [2000] 1 WLR 586.
Miss Walton submitted that value added tax does not fall within the definition of “costs” in r.44.1(1) and so, by that route, does not fall within the caps. I think that the difficulty with that argument is that if the value added tax paid by the claimant to his solicitors is not costs, how can it be recoverable? The definition provided by r.44.1(1) is clearly not intended to be exclusive, for it begins: “costs” includes.
To my mind the caps provided by paragraph 7.2 cannot include value added tax because they are expressed as percentages of figures which do not include value added tax. All of the figures set out in a budget exclude value added tax – as Precedent H makes clear. 2% of £100,000 excluding value added tax, would be £2,000 excluding value added tax.
Mr Gibbs sought to place greater emphasis on the figure of £1,000 in sub-paragraph 7.2(a). But it seems to me that the same reasoning must apply. If the percentages are exclusive of value added tax so must the £1,000 be exclusive of value added tax. Otherwise the sub-paragraph would read “shall not exceed the higher of £1,000 including value added tax or 1% excluding value added tax of the total of the incurred costs … and the budgeted costs”. That would require stating expressly.
This reasoning may or may not be inconsistent with my conclusion in BP that additional liabilities are included in the cap even though they are excluded from the budget. The authors of Cook on Costs (at para 15.21) have described my decision on that point as “challenging”. However whether or not that conclusion was correct does not arise in this case.
I obtain some support for my view, not only from the reasoning in Cook, but also more directly from Friston on Costs (3 rd edition) at paragraph 12.133:
While there is no authority on the point, it is likely that the percentage limits are exclusive of VAT. This is because Precedent H is designed in such a way as to discourage VAT being recorded therein, so it would seem odd if the costs were payable on a VAT-inclusive basis. Moreover, if it were not a VAT-exclusive limit, then a VAT-registered litigant would have the advantage over a non-VAT registered litigant – and that would be a curious state of affairs.
If I am wrong in this analysis then I am thrown back to my reasoning in BP. My decision in that case was based on the approach taken by the Civil Procedure Rule Committee to the cap on the costs of provisional assessment. Initially r.47.15(5) provided that the court would not award more than £1,500 in respect of the costs of provisional assessment. When disputes arose as to whether that included value added tax the committee...
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