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We have blogged previously about Long v Value Properties, an SCCO decision in which a receiving party failed to recover success fees because they failed to serve the additional information relating to the success fee with the bill that was required by CPD 32.5. That decision has now been subject to a successful appeal.
That success on appeal has been achieved is not that surprising. The decision at first instance was made shortly after Mitchell and before Denton, and represented something of a high-water mark with regard to the overzealousness with which relief from sanctions applications were approached by the Courts in the aftermath of the former case given the ‘qualms’ that Master Rowley admitted at first instance in applying a very draconian sanction in the face of prompt rectification of the error, a very swift application for relief, and no prejudice to the paying party.
The appeal proceeded on three grounds. First, it was argued that there was no breach at all, as the rules did not explicitly specify a time for serving the additional information. This argument was rejected, as it was implicit that the information should be served with the bill of costs and service at any other time would ‘make a nonsense of the structure of the rules governing detailed assessment’, in particular by encouraging satellite litigation in respect of disclosure prior to an assessment hearing. It therefore remains correct practice to serve the relevant details of additional liabilities with the notice of commencement.
However, what makes the appeal of even greater importance is the decision that the parties at first instance – and in our experience a majority of costs practitioners – were assuming all along that the wrong sanction applied. The second ground of appeal was that the parties and Court had erred at first instance in assuming that the applicable sanction was that found at CPR 44.3B (1) (d), namely that the receiving party could not recover as an additional liability
“any percentage increase where that party has failed to comply with—
(i) a requirement in the Costs Practice Direction; or
(ii) a court order,
to disclose in any assessment proceedings the reasons for setting the percentage increase at the level stated in the conditional fee agreement”
The Appellant now argued that the correct sanction was in fact CPR 44.3B (1) (c), that the receiving party could not recover as an additional liability “any additional liability for any period during which that party failed to provide information about a funding arrangement in accordance with a rule, practice direction or court order”.
The Court agreed with this submission, not least because it avoided the disproportionate ‘all or nothing’ sanction that had caused Master Rowley such discomfort at first instance. As a consequence, the sanction is very minor – the receiving party recovers no success fee on the usually negligible costs between service of the Notice of Commencement and service of the additional information.
Finally, the Court considered the clarification of Mitchell provided by Denton and confirmed that it would have allowed relief from sanction had CPR 44.3B (1) (d) been the correct sanction. The paying party’s conduct in pursuing the point was criticised as ‘unreasonable, opportunistic and non-cooperative’. That is probably a fair assessment given that the oversight could have been rectified with a single phone call.