Case No: 0806071
Neutral Citation Number: [2008] EWHC 90134 (Costs)
IN THE HIGH COURT OF JUSTICE
SUPREME COURT COSTS OFFICE

Clifford’s Inn, Fetter Lane
London, EC4A 1DQ

Date: 22nd January 2009

Before :

MASTER ROGERS
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Between :

	MOHAMMED JAWAD AURANGZEB 
(by his litigation friend Mrs Surlya Rahman)	
Claimant	
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	MISS NICOLA WALKER	Defendant	

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Mr Kevyn Thompson, Costs Draftsman (instructed by SK Legal) for the Claimant.
Mr David Cooper, Legal Executive and Costs Draftsman (instructed by McCullagh & Co.) for the Defendant. 

Hearing date: 15th December 2008
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Judgment

Master Rogers: 

The Issue
1.	The issue in this case is the basis upon which the Claimant’s solicitors’ costs should be assessed.  Although apparently straightforward, this issue has involved a consideration of the interrelationship of a number of the CPR Rules, and reference to a number of reported cases.
2.	For these reasons I reserved judgment, although the sums at stake are not in any sense substantial, because it seemed to me, as it did to the parties, that this case was perhaps of more general importance than simply to the parties involved.  
The Background
3.	The Claimant, born on 4th January 2004, was involved in a minor road accident on 28th August 2007, when he was 3 years and 7 months old.  At the time of the accident he was sitting in the rear seat of a London Taxicab on a booster seat.  A seat belt was being worn and there was a head restraint.  A vehicle being driven by the Defendant collided with the rear of the taxi pushing it forward into the car in front.  
4.	As a result, the claimant suffered soft tissue injuries to the left hand and neck and upon advice from his GP was prescribed paracetamol as required.  He suffered sleep deprivation for two weeks but 10 days after the date of the accident the hand injury had settled.
5.	The was continuing complaint of some stiffness and pain in the left side of the neck but, again, that appeared to have fully resolved by four weeks after the accident with no further problems having been reported.
6.	The Claimant was understandably shaken and tearful at the time of the accident and demonstrated some initial anxiety and wariness in relation to travelling in the vehicle.
7.	This has not persisted and there is no indication of any symptoms of anxiety or stress as a result of the accident and it can therefore be said that, medically, he has made a full recovery.
8.	The Claimant, through his mother and litigation friend Mrs Surlya Rahman, instructed solicitors to represent him in this matter and to pursue a claim for personal injury damages on his behalf.  Liability was never in dispute, and negotiations between the Claimant’s solicitors and the Defendant’s insurers took place without the necessity for proceedings to be issued and were successful.  
9.	It was agreed that the appropriate level of damages which were on offer, and which the Claimant through his next friend was willing to accept, were £500.  The exact agreement was a matter of some discussion before me during oral submissions and indeed at one point it seemed to be being suggested on behalf of the Claimant that, in the events which happened, there was not in fact any agreement at all.   
10.	 However the Claimant’s costs draftsman conceded, during the course of his submissions, that the Claimant did not seek to unravel the entire agreement but simply to submit that his solicitors were entitled to a more generous award of costs than that contended for by the Defendant.
11.	On the 15th November 2007 the Claimant’s solicitors disclosed medical evidence summarised above to the Defendant’s insurers, AXA Insurance, and invited the insurers to make an appropriate offer.  
12.	Having heard nothing from the Defendant, or her insurers, the Claimant’s solicitors wrote to AXA Insurance on 3rd January 2008.  The relevant paragraphs of that letter read as follows:
“We therefore make a formal part 36 Offer in respect of Quantum to be in the sum of £500 in full and final settlement net of CRU and any contributory negligence alleged.  The offer is also considered to be inclusive of interest.
Please note that you have 21 days from the date of this letter by which to accept the same whereafter it can only be accepted if the parties agree liability as to costs or with the court’s permission.
Please note that this offer is withdrawn on Thursday 24 January 2008 whereafter our client shall seek a greater amount together with indemnity costs.”
13.	It appears from the next letter that an agreement was struck on the telephone on 28th January 2008 (which, it is to be noted, is outside the 21 day period set out in the part 36 Offer letter quoted above).
14.	The Claimant’s solicitors version of that agreement is set out in their letter to AXA Insurance of the 28th January 2008 which reads as follows:
“We write further to the telephone conversation of today between our Mr Khan and your Mr Mark Brookbanks and can advise that our client accepts the offer in the sum of £500.00 net of contributory negligence and CRU in full and final settlement of his claim.
Please note that this acceptance is subject to you paying our reasonable and proportionate costs which we have agreed to deal with on a predictable basis and subject to you paying both the settlement amount and our costs within the next 14 days.  Enclosed is a parental indemnity form for that purpose.
Our Costs are therefore as follows:	Fixed Costs		-£800.00									20% Damages	-£100.00									12.5% Success Fee	-£112.50									17.5% VAT		-£177.19
			Disbursements	Gp Notes		-£20.00							Medical Report	-245.00							ATE Premium	-£367.50						
						TOTAL COSTS	-£1822.19	

We herewith enclose copy disbursement vouchers, copy CFA & mandate for your attention.
We therefore look forwards to receiving both cheques made payable to this firm.”
15.	Mr Brookbanks’ understanding appears to have been somewhat different as appears from his letter of 29th January which reads as follows:
“Your recent letter enclosing the medical report is acknowledged and we confirm having reviewed the report in some detail.  On the basis of the evidence provided to date we are able to agree your global offer made in the sum of £500.00.
We enclose copy parental indemnity form and would be grateful if you can arrange for this to be signed and returned.
We agree to pay your legally recoverable costs in this matter and await sight of these by return to conclude matters.
If you should have any queries pleas contact Mark Brookbanks on …”.
16.	There was some debate before me as to whether the letter from Mr Brookbanks was in fact a response to the letter of the preceding day from Mr Khan, but I think at the end of the day it was accepted that the two letters must have crossed.
17.	I say that for this reason.  The earlier letter from Mr Khan attached a parental discharge form which, strangely, contained the figure of £500 but was dated 15th November 2007.
18.	If in fact Mr Brookbanks had received that letter then it seems to me that he would not have bothered to have sent a blank parental discharge form with his letter of 29th January because he would already have had the requisite parental discharge form duly signed.   
19.	The parties agreed that the claim had been settled for £500 but where they differed and where my decision is required, is the basis upon which the Claimant’s solicitors are entitled to recover costs.  
The Costs Proceedings
20.	These were started in Peterborough County Court but the District Judge, without opposition from either side, considered that the issue would be better decided in the Supreme Court Costs Office and accordingly transferred the action to this Office.
21.	It came before me for directions in my capacity as Sitting Master and despite the relatively small sums involved, but taking into account the likelihood that any decision from a costs officer would inevitably be appealed to a costs judge, I decided to allocate it to myself at costs judge level because I was able to, and did, list it very shortly thereafter.
22.	I was, at the hearing, presented with a small lever arch file of papers containing two witness statements, the relevant contractual documents and a number of authorities to which reference was made.  
23.	The issue was conspicuously well argued before me on Monday 15th December by Mr Thompson on behalf of the Claimant and Mr Cooper on behalf of the Defendant. 
The Defendant’s submissions
24.	It was agreed between the advocates that the Defendant would make his submissions first.
25.	The Defendant’s principal submission was that although this case had never been allocated to a track, if it had been, it would necessarily have been allocated to the small claims track, and in those circumstances the Claimant’s solicitors would only be entitled to £250 made up as follows:  (1) the fixed fee of £50 under table 1 to CPR 45;  and (2) £200 for experts’ fees pursuant to CPR 27 PD 7.3.  
26.	CPR 45.7 deals with fixed recoverable costs in road traffic accident cases and reads as follows:
“45.7-(1)	This Section sets out the costs which are to be allowed in-
(a)	costs-only-proceedings under the procedure set out in Rule 44.12A; or
(b)   	proceedings for approval of a settlement or compromise under Rule 21.10(2),
in cases to which the Section applies.
(2)  	This Section applies where:
(a)  	the dispute arises from a road traffic accident;
(b)  	the agreed damages include damages in respect of personal injury, damage to property, or both;
(c)  	the total value of the agreed damages does not exceed £10,000; and
(d)  	if a claim had been issued for the amount of the agreed damages, the small claims track would not have been the normal track for that claim.”

27.	CPR 26.6 reads as follows:
“26.6(1)	The small claims track is the normal track for –
(a)	any claim for personal injury where – 
(i)	the financial value of a claim is not more than £5,000; and
(ii)	the financial value of any claim for damages for personal injuries is not more than £1,000;
………”
28.	In the light of those provisions Mr Cooper strongly submitted that the Claimant’s solicitors are not entitled to the have their costs assessed in accordance with CPR 45.9, 45.10 or 45.11.
29.	Mr Cooper further submitted that in these circumstances the Claimant’s solicitors’ costs fell to be assessed on the standard basis as provided by CPR 44.4 and he placed heavy reliance on 44.4(2) which reads as follows:
“44.4(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; and
(b)	resolve any doubt which it may have as to whether costs were reasonably incurred or reasonable and proportionate in amount in favour of the paying party.”
30.	Mr Cooper summarised his submissions in paragraph 25 of his skeleton which reads as follows:
“25.	It cannot be right that because proceedings were never issued (and the case was therefore never allocated), a party can recover substantially more by way of costs than would have been allowed if proceedings for the substantive claim had been issued and allocated.  The Claimant with the benefit of advice from appointed solicitors elected to deal with the settlement of the claim utilising a parental indemnity.”
The Claimant’s submissions
31.	Mr Thompson submitted that the Claimant’s solicitors were entitled to predictive costs as he described them, that is to say costs calculated as set out in the letter of 28th January quoted above, under CPR 45.7 because of the provisions of CPR 21.10, which he contended, were mandatory.
32.	CPR 21.10 reads as follows:
“21.10	(1)	Where a claim is made-
(a)	by or on behalf of a child or protected party; or
(b)	against a child or protected party, 
no settlement, compromise or payment (including any voluntary interim payment) and no acceptance of money paid into court shall be valid, so far as it relates to the claim by, on behalf of or against the child or protected party without the approval of the court. 
(2) Where-
(a)	before proceedings in which a claim is made by or on behalf of, or against, a child or protected party (whether alone or with any other person) are begun, an agreement is reached for the settlement of a claim; and
(b)	the sole purpose of proceedings is to obtain the approval of the court to a settlement or compromise of a claim, 
the claim must- 
(i) be made using the procedure set out in Part 8 (alternative procedure for claims); and
(ii) include a request to the court for approval of the settlement or compromise.”
33.	That procedure was not of course followed in this case because a parental indemnity was provided and understandably in order to minimise costs this procedure is well recognised within the profession, though not apparently by all the judiciary as will appear in one of the citations of authority which follow.
34.	Mr Cooper had suggested that there were a number of relevant authorities which, if not directly in point, were of strongly persuasive value, and, in one case, indistinguishable from the facts of this case, and therefore, if not binding, at least so strongly persuasive that I ought not to depart from it.  

The authorities
35.	The first case upon which the Defendant relied as a persuasive authority was Afzal v Ford Motor Co Ltd [1994] 4 All ER 720.
36.	This was a case heard before introduction of the CPR and was an employer’s appeal against the decision in the court below that an automatic reference to arbitration by a District Judge pursuant to CCR Ord 19 r3 where 22 employees brought claims against there various employers seeking damages in respect of minor personal injuries, should be rescinded in favour of a hearing in open court.  The headnote to the report reads in part as follows:
“Held – (1) The small claims arbitration procedure was intended to improve access to justice and, accordingly, the court should not rescind an automatic reference to arbitration under CCR Ord 19, r3(1) merely because a question of law was involved or the facts were complex, since r3(2)(a) made it clear that a question of law had to be difficult and a question of fact exceptionally complex for a claim to be tried in court.  Moreover, it was not a proper interpretation of the rules to reintroduce those matters under r3(2)(d) as subject matter that made it unreasonable for the claim to proceed to arbitration, since reference to ‘subject matter’ in r3(2)(d) meant something of sufficient importance to one or more of the parties to justify trial in court, such as, for example, a claim for damages for trespass which might have far-reaching consequences for the rights of the parties, a claim involving ownership of a family heirloom, or test cases in which the rights of others were likely to be affected by the award.  The law applicable in employers’ liability claims was often straightforward and although the facts could be complex, in most instances the question was whether the employer had taken reasonable care or exposed the employee to an unnecessary risk of injury and the medical issues were unlikely to be complex where the sum claimed or the amount involved was less than £1,000.  Furthermore, the hardship of an employee representing himself against a legally represented employer was one faced in all cases where the financial resources of the parties were unequal and was a matter for the arbitrator to take into account in the procedure to be adopted for arbitration, rather than being a decisive factor against proceeding to arbitration in the first place.  It followed that it was wrong to approach employers’ liability claims involving amounts of below £1,000 as a class of case which was, in general, unsuited to arbitration in the 16 claims against the motor company could not be supported.  The motor company’s appeals would accordingly be allowed and the cases would be remitted for individual consideration by the district judge.”
37.	Mr Cooper then referred to the case of Voice and Script International Ltd. v Alghafar [2003] EWCA Civ 736.
38.	The leading judgment was given by Lord Justice Judge (as he then was, he now of course being the Lord Chief Justice).  The facts are complicated and need not be repeated but the paragraph upon which Mr Cooper relied is paragraph 20 which reads as follows:
“With that lengthy and slightly involved background I can turn briefly to the principle, which seems to me to be perfectly clear.  By treating the absence of allocation to track as conclusive, in my judgment District Judge Jenkins misdirected himself.  The omission may have meant that the small claims costs regime did not follow as a virtually automatic starting point, but it did not preclude the court even from considering whether it would be reasonable to make an assessment consistent with the small costs regime, or, for that matter, to apply the regime to a claim which should never have exceeded and never was anything more than a small claim.  If that approach is not expressly stated in the Civil Procedure Rules, it follows from two essential principles, first, the discretionary nature of costs orders, and second, the overriding requirement of proportionality in civil litigations generally, and also as an essential ingredient for consideration when any question of costs arises:  see Home Office v Lownds [2002] EWCA 365.”
39.	However the case on which Mr Cooper placed heaviest reliance is that of His Honour Judge Stewart QC at Liverpool County Court in Michael Coles v Sedat Keklik decided at Liverpool Combined Court Centre as recently as 30th June 2008.  
40.	Judge Stewart was hearing an appeal from the decision of Deputy District Judge Rich given in January 2008 in which he had made the following order:
“There is to be a detailed assessment of the claimant’s costs, not limited to small claims track amounts.”
41.	Paragraphs 3 and 4 of Judge Stewart’s judgment read as follows:
“3.	The background facts in relation to this matter are that the claimant, Sedat Keklik, when aged eight, on the 15th August 2005, was involved in a road traffic accident, suffered a minor blow to the left shin, requiring no medical treatment, two to three nights disturbed sleep and some slight nervousness when a passenger, for a short while after the accident.  He fully recovered.
4.		His father then instructed solicitors to pursue a claim for personal injury damages, the defendant admitted liability and, prior to any proceedings, the defendant offered £250 in damages.  The claimant asked for payment of £250 “subject to payment of our costs” and on 19th October 2006 settlement was agreed on that basis.”
42.	The learned Judge apparently had not come across a “parental indemnity”, as he said in paragraph 6:
“Albeit that this point was not discussed or questioned in the court below, I have raised the whole issue of the “parental indemnity”.  It is not something I personally have come across before, whether in practice or sitting as Designated Civil Judge here for the last five years but it is, apparently, a procedure known in the profession.  I asked counsel to assist me because I could not find any provision in the rules which allows for “parental indemnity” in the case of a claim by a minor.  As far as I understand the rules, if there is a compromise by or on behalf of a child, then there has to be court approval under Rule 21.10.  If there is approval under Rule 21.10 or a claim for approval, the claim must be made using the procedure set out in Part 8.  (That is Rule 21.10(2)).  Then under Rule 8.9(c) the claim shall be treated as allocated to the multi-track and, therefore, Part 26 does not apply.”
43.	His Honour Judge Stewart then went on to consider how the claimant’s solicitors’ costs should be assessed and in paragraph 10 he said:
“Whether one arrives by way of Rule 44.12(A) at an order for costs to be assessed and (by 48.5), for that to be a detailed assessment, or whether if, as seems to me, subject to any further argument, as to what ought to have been the case, namely that there should have been Part 8 proceedings under Rule 21.10, and then there would be an order for costs under Rule 44.3, it is the assessment which is critical in the matter before me.  It is accepted that the basis of the assessment under 44.4 should be on the standard basis and then the central provision is that at 44.5 which reads as follows:
‘(1)	The court is to have regard to all circumstances in deciding whether costs were –
(a)	if it is assessing costs on the standard basis –
(i)	proportionately and reasonably incurred; or
(ii)	were proportionate and reasonable in amount’”
44.	Although the Deputy District Judge before whom the original hearing was brought did not have his decision taped, it appears that one of his reasons for coming to the conclusion he did, was that to decide otherwise would have been in breach of Article 6 of the Human Rights Act.  But Judge Stewart roundly rejected that contention and said in paragraph 21 of his judgment:
“A child’s restriction, in terms of lack of majority is, it is said by the defendants – and I accept – remedied by the appointment of a responsible litigation friend.  If I am right in doubting the “parental indemnity” procedure, then what should happen in a case is that any proposed settlement should be put before the court.  The child then has the protection that the court would have to approve that amount as being a reasonable settlement.  If the court was in any real doubt about the merits of the compromise, then under the Practice Direction, Part 21 at paragraph 5.2(1), an opinion on the merits of the settlement of compromise could be required by the court to be given by counsel or solicitor, because that paragraph says:
‘An opinion on the merits of the settlement or compromise given by counsel or solicitor acting for the child or protected party must, except in very clear cases, be obtained.’
It was presumably accepted by the solicitor acting on behalf of this claimant that this was a case which not only did they think it was unnecessary to put before the court, but where it was unnecessary to put before the court any opinion on the merits from counsel or solicitors.  Therefore it seems to me that it was adjudged to be a ‘very clear case’ by the solicitors acting for the claimant.”
45.	His Honour Judge Stewart then went on to review the cases I have already quoted namely Afzal and Voice and Script International and concluded in paragraph 30 as follows:
“It seems to me that if this claim had been issued (other than for approval under Rule 21.10 or for cost only under 44.12(a)) then the track to which it would have been allocated must have been the small claims track, there being no factors, other than the very factor that this claimant is a child, upon which it could be said that the small claims track was not the appropriate track.  If that is right, then it follows, it seems to me, that on an assessment of costs, albeit that having to be a detailed assessment, that the District Judge’s decision that the costs be ‘not limited to small claims track amounts’ was wrong because the reasons he gave are unsustainable, was outwith the discretion of the District Judge, albeit a very wide discretion and that the appropriate order should be that there is to be a detailed assessment of the claimant’s costs which should be on the basis of the small claims regime.”
46.	In his skeleton Mr Thompson suggested that the decision in Coles v Keklik is at variance with the cases cited in the footnotes to CPR 27 but the cases to which he refers, which certainly “go the other way”, are at District or Deputy District Judge level and therefore do not carry the same authority as that of His Honour Judge Stewart.
My Decision
47.	It seems to me that the decision in Coles v Keklik is directly in point and that even if in this case the procedure had been properly followed in accordance with Part 8 and the proposed settlement brought before a District Judge for approval, he would simply have ordered that the Claimant’s solicitors’ costs be assessed on the standard basis and that Mr Cooper’s analysis is correct so that those costs would therefore have been assessed as if the case had been brought under the small claims procedure.
48.	It is to be hoped that, after considering the draft of this judgment that is being circulated, the parties can agree on the quantum of costs for both the underlying claim and also the proceedings before the District Judge at Peterborough and before me.
49.	If such agreement is reached and the relevant figures are submitted to me, there will be no need for either party to attend when this judgment is formally handed down.