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Case Review: Fixed costs - Agency fees not payable by the Defendant

23 June 2021
Simon Fisher and Safia Khan discuss the much circulated decision in Powles v Hemmings where we acted for the Defendant/Paying Party.

Background of underlying claim and the claimant's application

The Claimant brought a claim for personal injury following a road traffic accident in May 2019. The claim was commenced via the MOJ Portal but subsequently exited. Part 7 Proceedings were later issued and the claim concluded via negotiation in the sum of £5,850.

Costs

The Claimant's costs were payable pursuant to Part IIIA of CPR r. 45.

DWF agreed all costs and disbursements save for the fee for a psychological report claimed at £900 inclusive of VAT, the report being obtained via a medical agency. DWF sought a breakdown of the invoice which was duly provided by the medical agency and illustrated that over 50% of the invoice sought from the Defendant was for the agency fee.

As an agreement could not be reached the Claimant applied for a determination.

Determination

In readiness for the hearing DWF filed witness evidence introducing the breakdown of the medical agency invoice into evidence. 

At the hearing DWF relied on Aldred v Cham [2019] EWCA Civ 1780 to successfully argue that the agency fees were work captured within the Solicitors fixed costs. It was further argued that when CPR r. 45 was drafted there was no intention of Parliament to allow an additional agency fee for reports, had there been it would have been specifically catered for to guarantee certainty such as the additional fee for medical records at CPR r. 45.29I(2A)(c).

In response the Claimant relied on Beardmore v Lancashire County Council. However, when Beardmore was decided it was pre-Aldred and superseded by Aldred in any event. 

The Court found for the Defendant in a common-sense decision. In particular:

" 7. It seems to me, though, that the issues are entirely applicable to the facts of the instant matter, because we are looking at items of work which are deemed, or could be deemed to be within the fixed recoverable costs, which is effectively the administration of the claim; the dealing with correspondence, the to-ing and fro-ing between the parties, the obtaining of further documentation. These are all subsumed within the fixed costs which are awarded to a party within table 6B, they are not separate items of disbursement. "

"9…. The claimant’s own breakdown goes on to tell me that the remainder of the charge, the remaining £400, relates to various items of agency work, which from the submissions that I have heard and the authorities that I have been referred to, for the reasons that I have set out, I find are not recoverable in this case. They are items which, in my judgment, fall fairly and squarely within the analysis of their Lordships in Aldred v Chan[sic] as being items which are part and parcel of the fixed recoverable costs within table 6B of CPR 45.29C…."

Costs of the determination

Relying on Parsa v DS Smith PLC [2019] Costs L.R. 331 DWF successful obtained an order for the Claimant to pay costs despite the application in this instance being made within the fixed recoverable costs regime. The Court summarily assessed the Defendant's costs of the application awarding the Defendant's Costs Schedule as claimed.

What does this decision mean for Insurers?

Although this is not a binding judgment it is still persuasive given how the Court carefully analysed the scope of Aldred, and in arriving at the decision also considered Beardmore that is often relied on by Claimants/medical agencies.

It is long awaited confirmation that agency fees are not recoverable in the fixed recoverable costs regime. It should be noted that this principle does not just apply to medical reports, but all fees where an agency are involved such as MRI scans, engineers reports etc. This is likely to become evermore important with the amendment to CPR r.45 to allow recovery in principle of translation fees, such fees often being via agencies. 

Taking matters forward Insurers should be routinely asking for a breakdown of any agency fee invoices highlighting the Claimants duty to the Court in CPR r. 1, the guidance in Charman v John Reilly (Civil Engineering) Ltd and more recently the decision on the requirement for a breakdown of experts fees in Deutsche Bank AG v Sebastian Holdings Inc & Anor [2021] EWHC B4 (Costs).

Further when these disputes arise Insurers should always seek rely on Parsa to ensure a) recovery of their own costs in the event of a success, and b) to preclude the Claimant obtaining the costs of applications to determine disbursements in fixed recoverable costs.

Comment

The takeaway point from this judgment is that Claimants Solicitors are still using disbursements, at times from providers linked to the Solicitors business, to increase costs 'by the back door'. All disbursements should be examined in detail to ensure they are properly incurred and do not contain unrecoverable elements. 

DWF have had significant success in precluding Claimants from recovering costs of the applications to determine disbursements in matters where a costs order would ordinarily have been made in a Claimants favour. The use of Parsa is a real deterrent to Claimants Solicitors from seeking disbursements that are not recoverable as even if the Claimant succeeds the lower Courts are bound by Parsa not to award the Claimant the costs of the application.

Furthermore, DWF have had success in securing a non-party costs order in fixed costs litigation thus removing QOCS protection for the Claimant's Solicitor to 'hide behind'.

Find out more about our dedicated costs team

Further Reading

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