PANAYOT IVANOV V STEVEN LUBBE (FEE REMISSIONS) : FULL CASE DETAILS / THE DECISION
The case arose out of a road traffic accident that occurred on the 6th April 2013.
The Claimant commenced proceedings in the Portal.
The case exited the Portal and Part 7 proceedings were commenced.
On 29th March 2018 the Claimant accepted a Defendant’s part 36 offer in the sum of £6,500.00.
It was accepted by both parties that, by virtue of CPR r.36.20, the Claimant was entitled to his costs in accordance with section IIIA of Part 45.
The parties agreed the costs with the exception of the issue fee of £455.00.
The Respondent questioned his liability to pay the issue fee on the basis that the Appellant was, or may have been, entitled to fee remission and that it was not reasonable for the Claimant to have incurred the fee.
On 11th January 2019 the Appellant issued an application whereby they sought an order that:
- The Defendant do pay the Court Issue fee in the sum of £455.00 within 14 days.
- The Defendant do pay the Claimant’s costs of the application, summarily assessed in the sum of £ within 14 days.
The matter came before District Judge Davis who was first tasked with determining jurisdictional issue, namely whether acceptance of a Part 36 Offer in a fixed costs case gave rise in itself to a deemed order for costs and thus, the appropriate mechanism for resolving the substantive issue in dispute was by way of commencement of detailed assessment proceedings under CPR 47.7.
The District Judge decided in the affirmative and consequently concluded that the Appellant had adopted the wrong route in making an application under Part 23. In the circumstances, the issue of whether or not the court fee was payable remained undertemined.
The Appellant appealed.
Having determined that the District Judge was wrong in his determination of the jurisdictional issue and having allowed the appeal in that respect, HHJ Lethem went on to deal with the issue of whether or not the court fee was payable.
The Respondent’s Position
For the Respondent it was submitted by Mr Dunne that:
- the Appellant was unemployed and prima facie would be eligible for fee remission.
- the Respondent had not refused to pay the hearing fee but raised a query as to whether the Appellant could and had benefitted from the fee remission scheme. This query has not been answered.
- the Civil Procedure Fees Order 2004 lists the criteria for fee remission and specifically excludes those in receipt of Legal Aid. Thus, by necessary inference there is no exclusion for those who can fund their case by an alternative method such as a CFA or BTE insurance.
- on an assessment of costs, the paying party will only be required to pay costs reasonably incurred in the conduct of the litigation.
- [citing Friston on Costs (3rd Ed) at 52.97]:
“Receiving parties who were on state benefits at the material time may not have been required to pay court fees. If that was the case, the court may disallow the fee on the grounds that it was not reasonably incurred.”
- this extract, it was said, supported the proposition that one approaches the issue of the court fees untrammelled by considerations of mitigation of loss but simply applying the principles found in r. 44.3, that the court will not allow costs which have been unreasonably incurred or are unreasonable in amount.
The core of the Respondent’s argument as paying party was that, where a Claimant can avail themselves of fee remission, it is unreasonable to incur the fee and then seek to pass it on to the Defendant. By simple operation of r.44.3 and 44.4 the sum should be disallowed as unreasonably incurred.
It was further argued that:
- there was clearly a doubt about the issue of whether the court fees were unreasonably incurred and, this being a standard basis assessment, the burden lay on the Claimant / Appellant to satisfy the court as to reasonableness. As they had failed to do this, they should not recover the fees.
- there was body of case law that would support the Respondent’s case that the solicitors should utilise the benefits afforded by the state, including Surrey v Barnet and Chase Farm Hospitals NHS Trust  EWCA Civ 451.
Based on Surrey it was argued that this was authority for the proposition that, where there is a state funded regime and the court was assessing costs under rr.44.3 and 44.4, it might be unreasonable for the Claimant to forego the benefits of a state funded scheme in favour of a more commercial model that increased the burden of costs on the paying party.
The Respondent relied on the fact that Surrey is a costs case directing itself to the issue of the assessment of costs, unlike the cases relied upon by Mr. Morris for the Appellant. It was further argued that the tortfeasor is entitled to suggest that public funding was available and that it was unreasonable not to utilise it. Shortly put:
“if there is a lower costs regime available to the Claimant, why should the tortfeasor pay more?”
The Appellant’s Position
For the Appellant it was submitted that:
- the incurring of the court fee was not a failure to mitigate loss because the cost behind the court fee is still incurred.
- the real issue is not mitigation but who should bear the burden of the fee, the tortfeasor on the one hand or the state on the other.
- the notion that there was no cost where fee remission applied, is misconceived. There is still a cost to the state where parties litigate, the issue is who bears that cost?
- a successful Claimant is not required to recover from others sums that they may be liable to pay.
- the Claimant has a broad degree of liberty in choosing from whom they recover their losses. In this respect the Appellant relied on the decision in Peters v East Midlands Strategic Health Authority  QB 48.
Unlike Surrey Peters did not concern an assessment of costs but rather the quantification of a care claim. In that case the Defendant argued that since the claimant had a statutory right to have her care and accommodation provided by the local authority she could not recover those costs from the defendants because she had suffered no loss. At paragraphs 53 and 54 the court said:
“53. Having reviewed these authorities, we can now express our conclusion on this issue. We can see no reason in policy or principle which requires us to hold that a claimant who wishes to opt for self-funding and damages in preference to reliance on the statutory obligations of a public authority should not be entitled to do so as a matter of right. The claimant has suffered loss which has been caused by the wrongdoing of the defendants. She is entitled to have that loss made good, so far as this is possible, by the provision of accommodation and care. There is no dispute as to what that should be and the council currently arranges for its provision at The Spinnies. The only issue is whether the defendant wrongdoers or the council and the PCT should pay for it in the future.
54. It is difficult to see on what basis the present case can in principle be distinguished from the case where a claimant has a right of action against more than one wrongdoer or a case such as The Liverpool (No 2)  P 64 where a claimant has a right of action against a wrongdoer and an innocent party. In The Liverpool (No 2) , those two cases were treated alike. In our judgment, the present case should be treated in the same way. It is true that in the present case, the claimant’s right against the council is the statutory right to receive accommodation and care. But the fact that there is a statutory right in the claimant to have his or her loss made good in kind, rather than by payment of compensation, is not a sufficient reason for treating the cases differently. ”
At paragraph 89 Dyson LJ added:
“89. There is much to be said for the view that it is reasonable for a claimant to prefer self-funding and damages rather than provision at public expense, on the simple ground that he or she believes that the wrongdoer should pay rather than the taxpayer and/or council tax payer. In other words, it is not open to a defendant to say that a claimant who does not wish to rely on the state cannot recover damages because he or she has acted unreasonably.”
In reference to Peters it was argued that:
- the principles behind the award of damages and incurring of the court fee were indistinguishable. In both cases there are two parallel regimes. Under one, the state will bear the cost, under the other the tortfeasor would bear the cost.
- Liverpool (No2) was plain authority for the proposition that the Claimant could elect which regime to follow and that it would be wrong in principle for the Claimant to suffer as a result of that election.
It was said that the same principle is found in London Building Society v Stone  1WLR 1242 at 1262 A-C.
The Appellant said that there is further support for this proposition, if one considers cases where the Claimant had relevant insurance which might defray the loss sustained: Bee v Jenson (No.2)  All ER 791 at paragraph 9:
“Ever since Bradburn v Great Western Railway  LR 10 Exch 1] defendants have to accept that a claimant’s insurance arrangements are irrelevant and cannot be prayed in aid to reduce their liabilities”
In the Appellant’s submission:
- it is plain that that the successful Claimant can look to the tortfeasor and there is a common theme that applies equally to state provision, insurance and even benevolent contributions as was explained in Parry v Cleaver  AC 1 in which Lord Reid stated:
“It would be revolting to the ordinary man’s sense of justice, and therefore contrary to public policy, that the sufferer should have his damages reduced so that he would gain nothing from the benevolence of his friends or relations or of the public at large, and that the only gainer would be the wrongdoer. We do not have to decide in this case whether these considerations also apply to public benevolence in the shape of various uncovenanted benefits from the welfare state, but it may be thought that Parliament did not intend them to be for the benefit of the wrongdoer.
As regards moneys coming to the plaintiff under a contract of insurance, I think that the real and substantial reason for disregarding them is that the plaintiff has bought them and that it would be unjust and unreasonable to hold that the money which he prudently spent on premiums and the benefit from it should enure to the benefit of the tortfeasor.”
Thus, Mit was submitted there is a strong jurisprudential basis for arguing that the consequences of a tortfeasor’s wrong doing should be visited on them and not some collateral source of funding.
It was further submitted that:
- for policy reasons, it was wrong for a party who had no entitlement to fee remission, namely the tortfeasor, to benefit from fee remission. The purpose of the fee remission scheme is to guarantee access to justice for those who could otherwise be prevented by court fees from issuing a claim.
- it would be bizarre for a Claimant with less than £3000 in savings to benefit from fee remission when he had an alternative means of paying.
- the purpose of fee remission is not to limit the costs payable by a tortfeasor after a legitimate and successful claim.
- this is doubly so when the effect would be to reduce the amount of money available for the justice system given the rationale for the fees structure.
- the purpose of the scheme is not to subsidise tortfeasors from the public purse, at the expense of the system as a whole.
Turning to the facts of this case, it was argued that:
- the Claimant had BTE insurance which covered costs including fees.
- applying for fee remission took time and had an additional cost which was likely to fall on the solicitor and which was not contemplated when the fixed cost regime was set up.
- it was not unreasonable for the Claimant to utilise his insurance as opposed to the fee remission scheme which was complex and difficult to predict and the highest that the Defendant could put the case was that a Claimant may be eligible.
Finally it was argued that the burden was on the Defendant to show that the Claimant had unreasonably failed to mitigate loss and they failed to do that.
47. The first issue for consideration is where the burden of proof lies in relation to the contested issue of the hearing fee. It will be appreciated that Mr. Morris approached the issue as one of mitigation and thus submitted that the burden of proof lay on the Respondent to show that the Appellant had failed to mitigate his loss. Ms. Ashraf disagreed and approached the burden of proof as that which applied to the assessment of costs. On that basis, it is for the Appellant, as receiving party, to show that his approach was not unreasonable.
48. In resolving this issue, I return to my decision on jurisdiction. I have decided that the appropriate approach to this dispute is to issue a part 23 application seeking (a) an order for costs and (b) an assessment of those costs. Accordingly, in deciding whether to award the hearing fee the court is primarily assessing costs. The regime for such an assessment is comprehensively provided for in the rules, particularly at CPR r.44.3 which provides;
44.3 —(1) Where the court is to assess the amount of costs (whether by summary or detailed assessment) it will assess those costs—
(a) on the standard basis; or
(b) on the indemnity basis,
but the court will not in either case allow costs which have been unreasonably incurred or are unreasonable in amount.
(2) Where the amount of costs is to be assessed on the standard basis, the court will—
(a) only allow costs which are proportionate to the matters in issue. Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred; and
(b) resolve any doubt which it may have as to whether costs were reasonably and proportionately incurred or were reasonable and proportionate in amount in favour of the paying party.
(3) Where the amount of costs is to be assessed on the indemnity basis, the court will resolve any doubt which it may have as to whether costs were reasonably incurred or were reasonable in amount in favour of the receiving party.
This rule makes it clear that the burden of proof on a standard basis assessment lies on the receiving party to satisfy the court that the costs were reasonable and proportionate. I take into account that this is a statutory regime enshrined in the rules and that the rule engages similar issues to those involved in mitigation of loss arguments. In my judgment it is plain that this statutory regime is drawn in mandatory terms and which applies to the assessment of costs. The court is assessing costs in deciding the fees issue. Thus, I agree with Ms. Ashraf that the burden of proof on the fees issues lies on the Appellant to satisfy me that it was not unreasonable to forego the fee remission scheme.
49. I can dispose of a number of Mr. Morris’s arguments relatively quickly. I cannot see that the unpredictability or burden of applying for fee remission would afford the Claimant any reason for failing to make the application in most cases. The whole basis of the fee remission scheme is that it should be accessible to litigants of modest means to afford access to justice. As such it is designed to be used by litigants in person who have no legal representation. Hundreds of people of limited means successfully navigate the forms and the required information on a daily basis and receive fee remission. There is no reason to believe that a requirement to make the application for fee remission would represent an unreasonable burden on the Claimant. Nor is there any reason why they could not be expected to make this application themselves. Thus, I do not see that the inherent characteristics of the fee remission scheme render it unreasonable to expect an application to be made. Seen in this light the argument that the scheme is unpredictable has no foundation. The answer is that an application can be made and the Claimant will then find out if they were eligible. All that has to be done is an application has to be made in good time. I can see that there will be exceptional circumstances, for example where a firm is instructed shortly before the limitation period, where it would be reasonable to conclude that the unpredictability, the information required and the time that this takes might render it reasonable to incur a hearing fee. However, such cases will be unusual.
50. The core argument is whether it is reasonable to expect a Claimant to use the scheme or alternatively whether this places a burden on the taxpayer that is unreasonable. In this respect I agree with Mr. Morris that there is a loss where fee remission is utilised. The public purse is depleted by the amount that would otherwise have been paid. On this basis there is less in the public purse to devote to the justice system as a whole. Thus,
any suggestion that there is not loss where fee remission is utilised is misconceived. I am satisfied that Mr. Morris is right to characterise the dispute as over who bears the loss, the public purse or the tortfeasor.
51. In accordance with r.44.4 the court will have regard to all the circumstances in deciding whether costs were reasonably and proportionately incurred and the funding model may be relevant as it was in the case of Surrey relied upon by the Respondent. However, I have reservations about the Respondent’s reliance on the Surrey decision. Mr. Morris was taken by surprise by Ms. Ashraf’s reliance on this case and had not had an opportunity to consider it at any length. Nevertheless, he helpfully distinguished the Surrey case from the instant case. The focus of Surrey, and the two other cases decided at the same time, is on the advice that the Claimant received in deciding to opt for a CFA based funding model abandoning the legal aid funding. The court found that the advice given to the client in the Surrey case was potentially seriously misleading, concluding:
“60 The bottom line is that in each of the three cases the advice given to the client had exaggerated (and in two cases misrepresented) the disadvantages of remaining with legal aid funding; and had omitted entirely any mention of the certain disadvantage of entering into a CFA. Moreover, one of the advantages of entering into the CFA was Irwin Mitchell’s own prospective entitlement to a substantial success fee. In those circumstances I consider that District Judge Besford was correct in saying at para 81: “Where one of two or more options available to a client is more financially beneficial to the solicitor, the need for transparency becomes ever greater.”
Thus, the focus in Surrey was not on the reasonableness of incurring additional costs through a change of funding regime, but the effect of unreasonable advice and whether this vitiated the decision rendering it unreasonable. The ratio was that:
“A relevant factor in the reasonableness of the receiving party’s choice to incur costs was the advice that he had received, which might compromise the reasonableness of that choice if it was not sound and if it was the reason why the party had chosen to incur the costs; that where a receiving party had decided to switch from legal aid funding to a conditional fee agreement for a mix of good and bad reasons and some clear disadvantages to that party of making the switch had not been explained to him by his legal representative, the burden was on the receiving party to satisfy the costs judge that even if the bad reasons had not been put forward and the disadvantages had been properly explained he would still have made the same choice.”
This demonstrates that Surrey is not authority for any proposition that the Claimant must adopt the cheapest model for the funding of the case. It is concerned with the reasonableness of advice, especially where the solicitor stands in a fiduciary role vis a vis the client. Indeed, Surrey left open that it might be reasonable for a party to change their funding model to a CFA if the advice was sound. To that limited extent, the authority contemplated it might be legitimate to adopt a more costly funding scheme in appropriate circumstances. As such it did not assist the Respondent’s argument.
52. Ms Ashraf was on stronger ground in referring me to Friston and to the Civil Procedure Fees Order 2004. There is no doubt that those who drafted the fees order did identify one source of funding, namely legal aid, but made no mention of insurance based funding or CFAs. I approach the matter on the basis that counsel was correct to suggest that there is nothing inherent in the regime to debar a Claimant from successfully using it. I am not sure that I am greatly assisted by the short extract from Friston. On a true analysis the extract assumes that the receiving party has not paid the court fee, as is demonstrated by the phrase “if that was the case…”. Accordingly it is directed to the operation of the indemnity principle, namely that a receiving party who does not pay the issue fee cannot recover it as a disbursement. Alternatively, it does no more than state the general proposition that a party who unreasonably incurs a disbursement may not recover it. It leaves open the corollary that, depending on the facts of the case, they may recover it.
53. Ms. Ashraf had to concede that there was nothing in the fee remission scheme that required its use by an eligible Claimant. The wording of the scheme did not inevitably lead to the conclusion that it was reasonable to place the burden of the cost of the court fee on the state. The other side of the balance is represented by the case law upon which Mr. Morris relied. I find it significant that there is a body of case law from the appellate courts that have examined different aspects of the issue. In my judgment Peters provides some considerable assistance. That case was concerned with a party who could defray their ‘care loss’ on the state and yet chose to visit it on the Defendant. Of course, the court held that it was not unreasonable to take that course and thus the tortfeasor was liable.
54. Ms. Ashraf submitted that the two situations were not analogous in that Peters concerned damages, whereas the decision for me concerns the assessment of costs. That is a fair submission and engages a decision that I have already identified, namely that the burden of proof is different on a standard based assessment as opposed to mitigation of loss. Ms Ashraf has not identified any other relevant factor distinguishing damages from costs. Accordingly, I have asked myself whether the reversal of the burden of proof is sufficient to disapply the Peters decision. In my judgment it is not. The difference between the cases is merely where the burden lies. Peters was not a case which turned on a fine point that the Defendant had failed to discharge a burden of proof. Rather it engaged the simple proposition that it was not reasonable to depart from the general rule in The Liverpool (No 2) namely that an innocent party can elect to pursue the tortfeasor where he has two potential avenues of recompense. Of course the passage in Dyson LJ’s judgment at paragraph 89 of Peters directly addressed the issue that it is not unreasonable for a Claimant to believe that the wrongdoer should pay rather than the taxpayer and/or council tax payer.
55. I am fortified in this conclusion by the similarity of approach in relation to gratuitous assistance to the Claimant or insurance based funding examined in Parry and Bee v Jenson. Those decisions roundly rejected the notion that the tortfeasor could obtain a benefit from the arrangements that the Claimant had in place. The truth is that these decisions present something of a hurdle for the Respondent. Unless the Respondent can distinguish the hearing fee position from the damages position then Bee v Jenson and Parry are binding authority for the fact that the Claimant could pass on the cost even though he had insurance or gratuitous assistance. It follows that unless one can distinguish the insurance position from the fee remission position, then the rationale of the insurance based cases would travel through to fee remission cases. The Respondents have not sought to make such a distinction and thus it is difficult to see why a logic that applies to a Claimant who has alternative sources of funding, whether it be state (Peters), insurance (Bee v Jenson), another gratuitous source of funding (Liverpool No.2) or gratuitous support (Parry) should be different. These cases represent a formidable body of case law that allows the Claimant to legitimately elect to make their claim against the tortfeasor as opposed to relying on alternative sources of funding.
Ms. Ashraf has not been able to suggest any fundamental distinction that would lead to a diametrically different decision where the loss is represented by a hearing fee as opposed to a head of damage.
56. Thus while the fees order does not exclude commercial funding, the above jurisprudence does suggest that it is not unreasonable for the Claimant to pass the costs of wrongdoing onto the wrongdoer.
57. This answers a further potential objection to the Claimant’s position, namely that their argument would produce an arbitrary result.
Some claimants will avail themselves of fee remission and the Defendant will not be required to reimburse this. Others will seek to pass on the payment to the tortfeasor. The thrust of the case law to which I have referred is that the Claimant has an election as to who to recover from and this is no more than one of a number of individual characteristics that arise in any assessment of damages and costs.
58. An alternative approach adopted by Mr. Morris was to argue on public policy grounds that it is wrong for the tortfeasor to obtain a windfall from the fact that the Claimant is fees exempt. That is not the purpose of the fees exemption scheme. I have some sympathy with that argument. I have already identified this issue as who bears the loss, the state or the wrongdoer. There is some support in the caselaw for the notion that it is not unreasonable for the Claimant to visit on the tortfeasor the consequences of their misdeed. That is certainly the thrust of paragraph 89 of Peters and was expressed in more robust terms in Parry in the extract of Lord Reid’s judgment:
“It would be revolting to the ordinary man’s sense of justice, and therefore contrary to public policy, that the sufferer should have his damages reduced so that he would gain nothing from the benevolence of his friends or relations or of the public at large, and that the only gainer would be the wrongdoer.”
This engages the very public policy issues that Mr. Morris relied upon in submissions. Accordingly, I would agree that
there are strong public policy grounds for saying that it is not unreasonable for a Claimant to preserve the public purse and direct the cost of wrongdoing on the tortfeasor. These are relevant considerations to an assessment of reasonableness under rr. 44.3 and 44.4.
59. By either of these routes I am satisfied that it is not unreasonable for the Claimant to pass on the hearing fee to the Defendant and, subject to me being satisfied that the fee was in fact incurred, I would award it pursuant to my power under r.45.29I. Of course, there are no issues of proportionality as the amount of the fee is fixed by law.
60. In the above circumstances I allow the appeal and I will order the Defendant to pay the hearing fee subject to the formalities set out below being complied with.
61. It is my intention to hand down this judgement on the date indicated in the headnote. The attendance of the parties is excused. The matter will be relisted to consider any ancillary matters including the assessment of the hearing fee and time shall run from that hearing. At the hearing I will need to be satisfied that there is no breach of the indemnity principle and thus a Form N260 will be required for that hearing. Because this is a disbursement only issue, I am content that this is just the last page of the form proper which will include the disbursement and the signature. At the hearing I will also consider the position of the Claimant in relation to the redacted letter. I will circulate a draft order with the draft of this judgment.
62. It only remains for me to thank Mr. Morris and Ms. Ashraf and their colleagues for their assistance.