Light On Line Ltd & Anor v Zumtobel Lighting Ltd [2012] EWHC 3376 (QB)

[2012] EWHC 3376 (QB)Case No QB/2012/0076IN THE HIGH COURT OF JUSTICEQUEEN'S BENCH DIVISIONON APPEAL FROM MASTER HAWORTH COSTS JUDGEVenue Royal Courts of Justice, Strand, London, WC2A 2LLDate 29/11/2012
Before
MRS JUSTICE SLADE DBE(Sitting with Master Campbell and Mr Graham Humby (as assessors))
Between
LIGHT ON LINE LIMITEDClaimantsPROJECT MANAGEMENT LIGHTING LIMITEDClaimantZUMTOBEL LIGHTING LIMITEDDefendant
Martin Farber (instructed by Simons Muirhead and Burton) for Claimants/AppellantsRobert Marven (instructed by Watmores) for Defendant/RespondentHearing Hearing date: Tuesday 17 th July 2012
Judgment
[1]The Appellants appeal from three decisions of Master Haworth made in the course of a detailed assessment of the costs Zumtobel Lighting Ltd (the Defendant) are to pay Light on Line Ltd and Project Management Lighting Ltd (the Claimants) following settlement of proceedings brought by the Claimants against the Defendant. The claim arose from the costs of remedial work alleged to have been carried out by the Claimants following the supply by the Defendant of lights, admitted to be defective, fitted by the Claimants in showrooms of their clients. The claim for £239,816.98 was settled by the Defendant agreeing to pay to the Claimants £120,000 and costs. On detailed assessment of the costs the Defendant was to be ordered to pay the Claimants, Master Haworth made the following decisions which are appealed. i) The decision on 15th December 2011 that a redacted After The Event (‘ATE’) insurance certificate provided by the Claimants did not comply with Costs Practice Direction (‘CPD’) 32.5(2)(c); ii) The decision on 16th December 2011 to refuse relief under CPR 3.9 from the sanction of disallowing the claim for the insurance premium applied pursuant to CPR 44.3B(1)(e) in respect of the Claimant’s failure to comply with CPD 32.5(2)(c); iii) The decision on 15th December 2011 to reduce the Claimants’ solicitors’ success fee to 40% and the Claimants’ counsel’s success fee to 20%.[2]At the hearing of this appeal I sat with and have been greatly assisted by the experience of Master Campbell, Costs Judge and Mr Graham Humby, a solicitor assessor. However the determinations made in this appeal and this judgment are mine alone.

The Relevant Provisions of the CPR and the Costs Practice Direction (‘CPD’)

[3]CPR: 44.3B(1) Unless the court orders otherwise, a party may not recover as an additional liability- (e) Any insurance premium where that party has failed to provide information about the insurance policy in question by the time required by a rule, practice direction or court order. 47.6(1) Detailed assessment proceedings are commenced by the receiving party serving on the paying party-(a) notice of commencement in the relevant practice form; and(b) a copy of the bill of costs. (e) Any insurance premium where that party has failed to provide information about the insurance policy in question by the time required by a rule, practice direction or court order. (a) notice of commencement in the relevant practice form; and (b) a copy of the bill of costs.• . Other documents which the party must file when he requests detailed assessment.) 5. CPD Section 32 Commencement of detailed assessment proceedings Rule 47.6 32.2 A detailed assessment may be in respect of: (3) both base costs and additional liability. 32.4 If the detailed assessment is in respect of an additional liability only, the receiving party must serve on the paying party and all other relevant persons the following documents: (a) a notice of commencement; (b) a copy of the bill of costs;(c) the relevant details of the additional liability. 32.5 The relevant details of an additional liability are as follows: (2) If the additional liability is an insurance premium, a copy of the insurance certificate showing- (a) whether the policy covers- (i) the receiving party’s own costs; (ii) the receiving party’s opponent’s costs; (iii) the receiving party’s own costs and opponent’s costs; and (b) the maximum extent of that cover; and (c) the amount of the premium paid or payable. CPD 32.7 applies CPD 32.5 to an assessment of an additional liability where base costs are also claimed. (3) both base costs and additional liability. (a) a notice of commencement; (b) a copy of the bill of costs; (c) the relevant details of the additional liability. (2) If the additional liability is an insurance premium, a copy of the insurance certificate showing- (a) whether the policy covers- (i) the receiving party’s own costs; (ii) the receiving party’s opponent’s costs; (iii) the receiving party’s own costs and opponent’s costs; and (b) the maximum extent of that cover; and (c) the amount of the premium paid or payable. (i) the receiving party’s own costs; (ii) the receiving party’s opponent’s costs; (iii) the receiving party’s own costs and opponent’s costs; and 6. CPR: 3.8(1) Where a party has failed to comply with a rule, practice direction or court order, any sanction for failure to comply imposed by the rule, practice direction or court order has effect unless the party in default applies for and obtains relief from the sanctions. Relief from sanctions 3.9(1) On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order the court will consider all the circumstances including- (a) the interests of the administration of justice; (b) whether the application for relief has been made promptly; (c) whether the failure to comply was intentional;(d) whether there is a good explanation for the failure;(e) the extent to which the party in default has complied with other rules, practice directions, court orders and any relevant pre-action protocol;(f) whether the failure to comply was caused by the party or his legal representative;(g) whether the trial date or the likely trial date can still be met if relief is granted;(h) the effect which the failure to comply had on each party; and(i) the effect which the granting of relief would have on each party. (2) An application for relief must be supported by evidence. 44.4(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. 44.5(1) The court is to have regard to all the circumstances in deciding whether the costs were- (a) if it is assessing costs on the standard basis- (ii) were proportionate and reasonable in amount. (3) The court must also have regard to- (b) the amount or value of any money or property involved; (d) the particular complexity of the matter or the difficulty or novelty of the questions raised. Relief from sanctions (a) the interests of the administration of justice; (b) whether the application for relief has been made promptly; (c) whether the failure to comply was intentional; (d) whether there is a good explanation for the failure; (e) the extent to which the party in default has complied with other rules, practice directions, court orders and any relevant pre-action protocol; (f) whether the failure to comply was caused by the party or his legal representative; (g) whether the trial date or the likely trial date can still be met if relief is granted; (h) the effect which the failure to comply had on each party; and (i) the effect which the granting of relief would have on each party. (a) on the standard basis; or (b) on the indemnity basis, (a) if it is assessing costs on the standard basis- (ii) were proportionate and reasonable in amount. (b) the amount or value of any money or property involved; (d) the particular complexity of the matter or the difficulty or novelty of the questions raised.

Some Relevant Dates

[4]09.09.09 – Solicitors enter into a Conditional Fee Agreement (‘CFA’) with Claimants and obtain ATE insurance. 02.10.09 – Letter of Claim. 06.11.09 – Letter informing Defendant that Claimants’ solicitors were acting under a CFA and have ATE insurance. 17.11.09 – Defendant’s reply to letter of claim. 17.12.09 – Counsel enters into CFA with solicitors. 15.01.10 – Claim form issued with Particulars of Claim. 03.02.10 – Amended Particulars of Claim. 24.02.10 – Defence and without prejudice offer of £15,000. 05.03.10 – Claimants’ Part 36 offer to settle for £190,000. 15.09.10 – Defendant’s Part 36 offer of £50,000. 28.09.10 – Claimants reject Defendant’s Part 36 offer and offer to settle for £140,000. 18.01.11 – Claim settles for £120,000 plus costs to be assessed if not agreed. (24.01.11 – Date of trial.) 13.04.11 – Notice of commencement for detailed assessment of costs and Bill of Costs claiming a total of £350,671.15 served. 10.5.11 - Defendant’s Points of Dispute in respect of the Claimants’ Bill of Costs. 18.11.11 - Claimants’ Points of Reply to the Defendant’s Points of Dispute and redacted insurance certificate served. About 8.12.11 - Unredacted insurance certificate provided to Master Haworth. 15 and 16.12.11 – Detailed Assessment hearing before Master Haworth. The Insurance Premium[5]The Claimants claimed an ATE insurance premium of £60,375 at Item 62 in the Bill of Costs.[6]In their Points of Dispute of 10th May 2011 the Defendant wrote in response to item 62:
“The Claimants have served no information whatsoever in support of the additional liability contrary to CPD 32.5(2). Accordingly, CPR 44.3B(1)(e) prevails and the Claimants may not recover the premium claimed. In the alternative, the Defendant can but reserve its position as to quantum pending a successful application for relief from sanctions and disclosure of at least some material to support such an enormous premium.”
With their Reply of 18th November 2011 to the Defendant’s Points of Dispute, to which they attached “a copy of the insurance premium certificate” the Claimants’ solicitors wrote:
“The Defendant has overlooked that [sic] fact that the Claimants have served information in support of the insurance premium. The Claimants’ Bill of Costs confirms that by letter dated 6th November 2009 the Defendant was notified of the insurance premium, including the applicable stages for the increases in the premium, and that Notice of Funding for the premium was filed and served on 15th January 2010. These details were specifically provided within the Bill of Costs to avoid such challenges being needlessly raised.”
[7]The insurance certificate provided with the Points of Reply stated: “Premium. The amount specified at Premium(a) shall be payable if the Legal Action is settled completely prior to the issue of proceedings subject only to agreement or assessment of costs; the amount specified in(b) shall be payable if the Legal Action is settled after proceedings have been issued but more than 45 days before the date listed by the Court for the commencement of the trial; the amount specified in(c) shall be payable if the legal action is settled 45 days or less before the beginning of the trial as listed by the Court or is heard at trial.” £60,375 was specified as the total premium payable in (c). The figures for (a) and (b) were redacted.[8]On 15th December 2011 after Master Haworth found that the redacted certificate did not comply with CPD 32.5(2)(c), the Claimants’ solicitors provided the Defendant with the unredacted insurance certificate showing the amount of the premia specified under (a) and (b).[9]The Claimants applied for relief from the sanction of not being able to recover the insurance premium as an additional liability. By his judgment on 16th December 2011, the Master refused the Claimants’ application for relief from sanctions. The Success Fees Solicitors’ success fee[10]The Conditional Fee Agreement (‘CFA’) entered into on 9th September 2009 between the Claimants and their solicitors contains the following material provisions:
“i) Paying us If you win your claim, you pay our basic charges, our disbursements and a success fee. The amount of these is not limited or based on the amount of damages which you may eventually recover…[after reference to a document titled ‘Conditional Fee Agreements: What you need to know’.] See page 8 of the document for the definition of ‘win’ in the context of a claim in this type of case. It may be that your opponent makes a Part 36 Offer to settle which you reject on our advice, and your claim for damages goes ahead to trial and the outcome is less favourable to you than that offer. If this happens, we will not seek our basic charges for the work done after we received notice of the offer. ii) The Success Fee The success fee is set at a percentage increase of our basic charges as follows: 100% of the basic charges, where a claim proceeds to 28 days after service of the defence; 50% where a claim settles after issue, but before 28 days after service of the defence; or 25% where a claim settles before issue of the claim. Of this percentage increase 0% relates to the costs of postponement of payment of our basic charges and disbursements. The reasons for setting the success fee as described above are set out in the risk assessment attached hereto. See page 2 of the attached document entitled ‘Conditional Fee Agreements: What you need to know’ for an explanation of ‘Success Fee’.”
Conditional Fee Agreements: What you Need to Know “Success fee 14. The success fee percentage set out in the agreement reflects the following: (a) the fact that if you lose, we will earn nothing; (b) our assessment of the risks of your case; (c) the fact that if you win we will not be paid our basic charges until the end of the claim in the percentages set out in the agreement which depends on when you win the claim. The postponement as set out at paragraph (c) constitutes the percentage increase incorporated into basic charges depending on when you win the claim (see attached CFA paragraph ‘The Success Fee’).” “Explanation of words used (e). Damages Money that you win whether by a court decision or settlement. (o). Win The case is finally decided in your favour, whether by a court decision or an agreement upon terms including but not limited to payment of damages by or on behalf of your opponent.”[11]The risk assessment attached to the solicitors’ CFA of 9th September 2009 included the following:
“The success fee set out in the Conditional Fee Agreement reflects the following- 6. that the basis of the claims has been clearly explained to the proposed defendant who after having considered them has rejected them both as to liability and quantum (as evidenced by the exchange of correspondence to date and see document attached headed ”
Stated reasons given by Zumtobel not to pay”). 7. That the risk in taking this action is as follows: 7.2. the outcome of the dispute will turn on the interpretation of imprecise contractual wording which accordingly, cannot be confidently predicted; 7.3. the contracts were perfected many years ago and were (sic) recollection needs to be relied upon, is likely to be unreliable; 9. Whilst we estimate the prospects of success at about 55% this could easily change following the response to the letter before action, The Defence, disclosure and/or witness statements.” 7.2. the outcome of the dispute will turn on the interpretation of imprecise contractual wording which accordingly, cannot be confidently predicted; 7.3. the contracts were perfected many years ago and were (sic) recollection needs to be relied upon, is likely to be unreliable; Counsel’s success fee[12]Counsel’s CFA of 17th December 2009 included the following provisions:
“The Claim 2. This agreement forms the basis on which instructions are accepted by counsel from the solicitor to act on a conditional fee basis for the client in his claim against: (‘the Opponent(s)’) Zumtobel Lighting Ltd; concerning a claim for damages arising from the supply of faulty lighting; Until: i) the claim is won, lost or otherwise concluded… Counsel’s Success Fee 17. (1) The success fee is set at 100% if the claim settles within 45 days of the trial date; 75% if the cases settles after the first exchange of witness statement and more than 45 days before the trial date; 50% where the claim settles after issue but before the first exchange of witness statements or 25% if the case settles within the 14 day period after service of a pre-action protocol letter but before the issue of a claim; (2) The reasons, briefly stated, for counsel’s success fee are that at the time of entry into this agreement: (i) The prospects of success are estimated by counsel as [55]% as more fully set out in the solicitors’ risk assessment to its Conditional Fee Agreement with the Client dated 9th September 2009 which counsel adopts, and a percentage increase of 100% reflects those prospects; (3) The reasons for counsel’s success fee are more fully set out in counsel’s risk assessment which is attached to the solicitors’ risk assessment to its Conditional Fee Agreement with the Client dated 9th September 2009 which counsel adopts. Definition of Success 19. (1) ‘Success’ means the same as ‘success’ in the Conditional Fee Agreement dated 9th September 2009 between the solicitor and the client. Part 36 Offer and Payments 20. If the amount of damages and interest awarded by a court is less than a defendant’s Part 36 payment into Court or effective Part 36 offer then: (1) If counsel advised its rejection s/he is entitled to normal and success fees for work up to receipt of the notice of Part 36 payment into Court or offer but only normal fees for subsequent work unless the Part 36 offer or payment has no effect on the costs awarded by the court; (2) If counsel advised its acceptance s/he is entitled to normal and success fees for all work done.” (‘the Opponent(s)’) Zumtobel Lighting Ltd; concerning a claim for damages arising from the supply of faulty lighting; Until: i) the claim is won, lost or otherwise concluded… (2) The reasons, briefly stated, for counsel’s success fee are that at the time of entry into this agreement: (i) The prospects of success are estimated by counsel as [55]% as more fully set out in the solicitors’ risk assessment to its Conditional Fee Agreement with the Client dated 9th September 2009 which counsel adopts, and a percentage increase of 100% reflects those prospects; (3) The reasons for counsel’s success fee are more fully set out in counsel’s risk assessment which is attached to the solicitors’ risk assessment to its Conditional Fee Agreement with the Client dated 9th September 2009 which counsel adopts. Part 36 Offer and Payments (1) If counsel advised its rejection s/he is entitled to normal and success fees for work up to receipt of the notice of Part 36 payment into Court or offer but only normal fees for subsequent work unless the Part 36 offer or payment has no effect on the costs awarded by the court; (2) If counsel advised its acceptance s/he is entitled to normal and success fees for all work done.”

The Claim

[13]In the original Particulars of Claim issued on 15th January 2010 and the Amended Particulars of Claim, three causes of action were pleaded. First it was alleged that the Defendant was in breach of contract by supplying the Claimants with lighting which was not fit for the purpose of installing in their client’s showrooms. It was alleged that this breach of contract caused loss and damage particularised under nine heads of loss. The total sum claimed was £239,816.98. Second, in the alternative it was alleged that the Defendant engaged both Claimants to notify them of and rectify all the problems experienced by the client “and/or to manage and maintain its relationship” with the client. The items which were claimed as damages in the first cause of action were claimed as sums due under the separate agreement resulting from the facts alleged to support the second cause of action. Third, in the further alternative, the Claimants claimed a reasonable sum, that claimed in the Particulars of Loss and Damage for services they alleged were provided by them at the Defendant’s request.

Conditional Fee Agreements: What you Need to Know

[14]In their Defence of 24th February 2010 the Defendant admitted that the lighting they supplied was defective but denied that this caused the loss and damage alleged. Further they denied the facts alleged in support of the alternative second and third causes of action. Each head of loss was challenged. The Defendant asserted that they were not liable to pay the First and/or Second Defendant the sum of £239,816.98 claimed or any sum.[15]The papers for the appeal did not include the letter before action and the Defendant’s response.[16]In a without prejudice offer of 17th November 2009 the Defendant’s solicitors ask the Claimants’ solicitors to confirm that there was no contractual relationship with the Second Claimant. Whilst the Defendant was willing to accept for the present purposes that it provided a defective product “what it is significantly less comfortable about accepting is that either of your clients have any actionable loss”. In addition to questioning any liability to the second Claimant, the Defendant’s solicitors questioned the causation and/or mitigation of loss in respect of the claim for rectifying problems with the light fittings. The Defendant’s solicitors concluded:
“Incidentally, if we have not invited your clarification as to a head of loss, that should not be taken to mean that our client tacitly accepts it. However, it ought to be obvious that for as long as the two substantial heads of loss are unresolved there is little prospect of any settlement. Pending your reply to our queries you can assume that liability for any loss is denied. Before your client rushes to issue proceedings we trust you will advise them of the requirements of the Construction and Engineering Protocol.”

Evidence in Support of Application for Relief from Sanctions

[17]Mr Mireskandari, a partner in the Claimants’ solicitors, made a witness statement on 15th December 2011 after the Master ruled that CPD 32.5(2)(c) had not been complied with and the sanction in CPR 44.3B(1)(c) would apply so that the claim for the insurance premium was disallowed subject to any successful application for relief. Mr Mireskandari addressed each of the factors set out in CPR 3.9(1). The statement included the following:
“2.c. Whether failure to comply was intentional My experience and that of Temple, the ATE insurers, and that of the costs draftsmen instructed in this matter, was that it was wholly in order to redact the prior stage premiums and to limit the information supplied to the paying party to the premium actually sought. Accordingly, although obviously the redaction was intentional, there was certainly no intention to fail to comply with any rule.” “d. Whether there is a good explanation for the failure The only explanation is that no failure was envisaged although, undoubtedly, given Master Haworth’s finding, there was a failure.” “f. Whether the failure to comply was caused by the party or his legal representative The failure to comply was caused by me following the guideline procedures required of me by the ATE insurers. My clients are wholly unaware of the failure to comply.”
The Judgments of the Master

The Insurance Premium

[18]CPD 32.5(2)(c) The Master noted that the Points of Dispute stated that the Claimants had served no information in support of the additional liability claimed in respect of the insurance premium contrary to the practice direction. A copy of an insurance certificate was served some months later with the figures for the premiums payable at stages (a) and (b) redacted leaving “the total premium that is payable”.[19]The Master held:
“7. It strikes me that if, as is being sought here, the figure that is to be paid is the C figure of £60,375, the A and B figures is information that the receiving party is entitled to receive to ascertain the relevance of the C figure to the earlier staging, because this premium is a global premium. It was set by the insurers as one premium, albeit in stages, and clearly the staging of the premium and the amount of the premium are of the utmost importance. Therefore, in those circumstances I adopt the submissions of Mr Marven that it is important for the receiving party to have information which entitles them to come to a conclusion as to what is a reasonable premium. In the circumstances I am satisfied that, adopting a purposive approach to the Rules, the receiving party has not complied with the practice direction at CPD 32.5(c), and provided information dealing with the amount of premium paid or payable. 8. It is a matter for them whether they wish to pursue the matter by way of an application for relief from sanctions which presumably they would make to me now.”
The Master held that the Claimants had not complied with CPR 44.3B(1)(c) because the redacted insurance certificate was not in accordance with the requirements of CPD 32.5(2)(c). Relief from Sanctions[20]An application for relief from the sanction of the additional liability of the ATE premium of £60,375 not being allowed was made immediately after the Master had ruled that CPD 32.5(2) had not been complied with. A statement by Mr Mireskandari of the Claimants’ solicitors was made in support of the application.[21]The Master approached the question of relief from sanctions on the basis that the Claimants did not comply with CPD 32.5(2) until the unredacted ATE insurance certificate was provided. On any view no insurance certificate was supplied with the Bill of Costs. It was only supplied in a redacted form in November 2011 and to the court in an unredacted form a week before the costs hearing. The receiving party had been on notice since May 2011 that the failure to serve the certificate was an issue that would be raised at the detailed assessment, yet an application for relief had only been made during the hearing.[22]Of the factors to be taken into account in exercising discretion under CPR 3.9 to grant relief from sanctions, in considering the interests of the administration of justice, CPR 3.9(1)(a), the Master pointed out that whilst the Defendant knew that the ATE “premiums were staged and that the premiums increased at the identified stages” they were not aware what those premiums were. The Master held that:
“it is vitally important that the information required by the Practice Direction is available to the receiving (sic) party to enable, for example, offers to be considered and made to dispose of cases in an efficient way.”
He considered that the absence of such information had been disruptive and had been prejudicial to the Defendant. As for CPR 3.9(1)(b) he held that the application for relief from sanctions had not been made promptly. In considering CPR 3.9(1)(c), (d) and (g) the Master observed that a reason for redaction of the certificate was advanced in the course of the hearing on 15th December 2011 which had not been raised in the Reply. There was no explanation why the certificate was not provided with the Bill of Costs. Were he to grant relief, the costs assessment hearing would have to be adjourned for the information very belatedly supplied to be considered and to enable the Defendant to obtain evidence, should they wish to do so, as to the basis upon which the premium had been rated. The Master expressed concern at the size of the premium: £60,000 for cover of £100,000.[23]The Master found that there had been prejudice to the Defendant. There was a serious breach of PD 32.5(2). At paragraph 16 he held:
“The document which was the subject of the Practice Direction 32.5(2) was not produced when it should have been. It has only just been produced now and, in my judgment, it is too late.”
The Master refused relief from sanctions. Accordingly Item 62 on the Bill of Costs, the ATE insurance premium, was disallowed. The

Solicitors’ success fee

[24]At the time of entering into the CFA on 9th September 2009 the solicitors assessed the risk of success at 55%. The stages of the success fee were 25% if the claim settled before proceedings were issued, 50% if it settled after issue but before 28 days after service of the defence and 100% thereafter.[25]Having regard to the definition of “win” in the solicitors’ CFA the Master held that any win:
“…say of £1 or one penny would trigger the success fee. Not quite a walk-away settlement, but a settlement on the basis that the defendants were to carry out minimal amounts of work or pay the invoice that is referred to in the particulars of claim would amount to a win, and on the claimants’ agreement would qualify for a success fee of 100 per cent.”
[26]The Master held that because proceedings were issued very soon after the CFA was entered into, the 25% success fee and the 50% success fee would “ratchet up very quickly to 100 per cent”.[27]The Master referred to the judgment of Sir Robert Nelson in Fortune v Roe [2011] EWHC 2953 (QB) 10th November 2011 and stated at paragraph 15:
“In paragraph 48, Sir Robert Nelson, in my judgment, hits the nail on the head. This goes to the central issue in this case: ‘What was the risk in February 2006 when the CFA was signed and what would a reasonable success fee be in such circumstances?’”
The Master observed at paragraph 17 that “Questions of Part 36 offers do not appear to arise in this case”. ‘What was the risk in February 2006 when the CFA was signed and what would a reasonable success fee be in such circumstances?’”[28]The Master held at paragraph 18 that the question he had to address was “what were the real risks of success on 9th September 2009 when the agreement was entered into?” He observed that having looked at the documentation and a likely outcome of the case, that the defendant had already carried out some work “and the fact that the parties appear to have agreed that his case really related to the quantification of damages”, the Master held that the “risk that the claimants’ solicitors were not going to recover a penny in this case is, in my view, not anywhere the figure that they put on it of 55 per cent”.[29]The reasons the Master reduced the solicitors’ success fee to 40% are set out in paragraph 19 of his judgment in which he held:
“19. My overall view of the matter, having looked at all the documents and having given consideration to the factors that the solicitor had in mind on the date that the CFA was entered into accords with a chance of winning of somewhere in the region of between 70 and 75 per cent. Using the ready reckoner, which I appreciate is a fairly blunt tool, would give a success fee of between 33 per cent to 43 per cent. I have taken into account the staging by looking at it in a simplistic way. Yes, this case did go a long way to trial, but when one looks at the starting figure, which is between 33 and 43 per cent, and factoring in something for the late settlement and the two stage approach, my overall view, therefore, is that the appropriate success fee in this case for the solicitor is 40 per cent. I will allow 40 per cent for the solicitors’ CFA.”

Counsel’s Success Fee

[30]Since counsel’s CFA was based on the same risks as the solicitors’, the Master approached the reasonableness of his success fee by considering the effect of what he held to be the only two differences between counsel’s and the solicitors’ claim to a success fee. He considered that the first stage of counsel’s success fee, 25% if the case settles within 14 days after service of pre-action protocol letter, “was never going to apply because the claimant had already issued, or was about to issue proceedings”. The other difference referred to in paragraph 22 by the Master was that:
“Counsel does not assume the same risk as a solicitor, because he does not take on board a Part 36 risk which the solicitor did. Counsel is agreeing that if there is a Part 36 offer made, and against his advice is not accepted, he still gets paid. He still gets paid his normal fees in relation to that matter. Therefore, he carries less and not more risk than the solicitor. For those reasons, it seems to me that his success fee must be less than that of the solicitors.”
Taking all those factors into account the Master allowed counsel a success fee of 20%.

The Submissions of the Parties

[31]Mr Farber for the Claimants submitted that the Master was wrong to decide that the redacted ATE insurance certificate did not amount to compliance with CPD 32.5(2)(c) but that in any event he was wrong to decide not to grant relief from the sanctions of disallowing the amount of the premium in the assessment of costs.[32]Mr Farber submitted that CPD 19.4(3)(c) is central to the appeal related to the ATE premium. CPD 19.4(3)(c) provides that where the funding arrangement is an insurance policy the party must:
“(c) State whether the insurance premiums are staged and, if so, the points at which an increased premium is payable.”
The Bill of Costs referred to a letter dated 6th November 2009 by which the Defendant was notified “of the funding arrangements in place and provided with details of the stages applicable to the increases in the success fee and insurance premium”. It was said that this information satisfied CPD 19.4(3)(c) and gave information required by CPD 32.5(2). In any event the fact that this information had been given should have been taken into account in deciding whether relief from sanctions should be granted.[33]In their Reply to the Defendant’s Points of Dispute commenting on the Claimants’ Bill of Costs which stated that the Claimants served no information whatsoever in support of the additional liability, they wrote:
“The Defendant has overlooked that (sic) fact that the Claimants have served information in support of the insurance premium,”
The information referred to was that in the letter of 6th November 2009. The Claimants attached a copy of the insurance premium certificate showing the amount payable at stage (c) but redacting those for (a) and (b).[34]Mr Farber recognised that the insurance certificate was served later than is required by CPD 32.5(2). However lateness was not the principal focus or reason for the Master’s decision that the CPD had not been complied with. Mr Farber contended that the Master erred in holding that the redacted certificate did not comply with CPD 32.5(2). CPD 32.5(2) requires information provided about the amount of premium paid or payable. Only one amount was paid, £60,000 payable at stage (c). That amount was disclosed.[35]Even if the redacted certificate did not comply with CPD 32.5(2) and a wrong view was taken that there had been compliance, Mr Farber submitted that this mistaken view was understandable and was a weighty factor to be taken into account in deciding whether to grant relief from sanctions. No doubt knowing the premium which would have been charged at stages (a) and (b) would assist the paying party in assessing the reasonableness of the (c) premium. The Master could have put the Claimants to their election in choosing whether to disclose the unredacted certificate or to prove its contents by other means, for example by a written statement. If necessary, the assessment hearing could have been adjourned to enable the Defendant to deal with the unredacted certificate. Mr Farber submitted that an argument based on comparison of the sizes of the premiums at different stages was “bread and butter stuff”.[36]Considering the factors to be taken into account in deciding under CPR 3.9, whether to grant relief from sanctions, Mr Farber contended that the interests of justice were not put in jeopardy by the service of the redacted certificate. He rightly acknowledged that even if the redacted certificate complied with CPD 32.5(2)(c) it was served late. However he contended that lateness in itself is not a reason to refuse relief from sanctions. The certificate was served on the Defendant one month before the detailed assessment hearing. If necessary there could have been an adjournment with costs awarded against the Claimants.[37]As for the promptness of the application for relief, Mr Farber contended that the focus of argument on non-compliance with CPD 32.5(2)(c) had been on the redaction and not the timing of service of the redacted certificate. While there was a dispute over the issue of whether the certificate provided complied with the CPD it was not necessary to apply for relief from sanctions for non-compliance.[38]It was said that the Master did not consider whether the failure to comply with the CPD as to timing of service of the certificate was intentional. The requirement to provide the certificate with the Bill was overlooked. If there were any prejudice caused by late service of the certificate it could be remedied by an adjournment.[39]Mr Farber contended that some breaches of the CPR or CPD are more serious than others. If the redacted certificate complies with CPD 32.5(2)(c) the delay in serving it was of a lesser order than the breach which the Master found established. Even if the redacted certificate did not comply with CPD 32.5(2)(c) Mr Farber contended that the Master erred in failing to grant relief from sanctions.[40]Mr Farber referred to the judgment of Spencer J in Manning v King’s College Hospital NHS Trust [2012] 1 Costs LR 105 in which at paragraph 42 the Judge referred to the need to concentrate “on the authoritative general guidance given by the Court of Appeal to the proper approach to application for relief from sanctions in CIBC Mellon Trust Co. v Stolzenberg [2004] EWCA Civ 827”. The guidance given was that after considering the nine factors in CPR 3.9 the court should stand back and see whether it is in accordance with the overriding objective in the CPR to lift the sanctions.[41]Mr Farber also referred to Scott v Duncan [2012] EWHC 1792 in which Spencer J observed at paragraph 43:
“The Master was correct to identify as the overwhelmingly crucial matter in exercising his discretion the fact that the defendant had known all along he was in litigation with a claimant who was funded by a CFA.”
Mr Farber contended that taking into account all the circumstance of this case, including by analogy that the Defendant had been on notice since 6th November 2009 that the Claimants had the benefit of ATE insurance, he erred in failing to give them relief from sanctions in relation to the ATE premium. The Success Fees[42]Mr Farber submitted that the Master misunderstood the risk element in the case. Three causes of action had been pleaded. There was a claim for damages and a claim for the cost of remedial work carried out by the Claimants. He contended that paragraphs 13 and 14 of the Defence show that liability was an issue between the parties. The dispute was not about quantum only. In the alternative to the damages claim for the admitted breach of contract by supplying faulty lighting units, the Claimants alleged that the Defendant engaged both Claimants to notify it of defects and to coordinate the rectification of all problems experienced by the client in whose showrooms the units were fitted. The Claimants alleged that these facts supported a new contract to the effect that for their services the Defendant was obliged to pay the claimants a reasonable charge by virtue of an implied term or because at their request the Defendant took the benefit of such services.[43]Mr Farber submitted that the Master failed to have regard to the fact that the Defendant maintained throughout that the Second Claimant’s claim was bound to fail as there was no direct contractual relationship between those parties. Further he submitted that the Master erred in rejecting the submission that the case would be factually challenging. The Defendant had alleged that they had carried out remedial work and thereby discharged all their obligations to the First Claimant, they put causation in issue and denied that the Defendant had engaged the Claimants to provide services organising remedial work and/or denied that services were provided for the Defendant, denied any liability to pay reasonable remuneration for this work and alleged a failure to mitigate.[44]Further, it was said there was a substantial dispute about quantum and mitigation of loss.[45]Mr Farber submitted that the Master placed undue weight on the low hurdle of the definition of “win” in the CFA which would trigger a success fee. The Master’s proposition that a payment of £1 would trigger an entitlement entitling solicitors and counsel to a success fee should not have affected his decision as to the degree of risk assumed in this case. On the facts of this case it was unrealistic to base any decision on a possibility that the case may settle for £1.[46]As for the basis upon which the Master approved a lower success fee for counsel than that for the solicitors, Mr Farber contended that he failed to have regard to Clause 20 of counsel’s CFA in which it was provided that if counsel advised rejection of a Part 36 offer and a court awarded a lesser amount, counsel was not entitled to a success fee for work after a Part 36 payment into court or offer unless the Part 36 offer or payment had no effect on the costs awarded by the court.[47]Mr Farber contended that the different stageings of levels of success fee between counsel and solicitors and the difference in the impact on them of a Part 36 offer should not have led to a difference in 20% in approved uplift for counsel. He initially submitted that at most it should have been 5% but in Reply he mentioned 10% but that these figures were not based on any mathematical calculation. What was to be done was to assess not the Part 36 risk specifically but the risk of recovery in the case overall.[48]Applying a rough cross check with the costs ready reckoner, on the basis of a 55% chance of winning Mr Farber contended that a success fee of 70-75% would have been reasonable for the solicitors. Applying the reckoner without the discounts to that in counsel’s case, the success fee for the solicitors applying the reckoner would be 82%.[49]Mr Marven for the Defendant contended that in respect of the ATE premium claimed, the Master was right to hold that the Claimants had failed to comply with the requirements of CPD 32.5(2) and accordingly, pursuant to CPR 44.3(1)(e), they were not entitled to recover the insurance premium.[50]Mr Marven contended that the Claimants were in breach of the requirement to provide the ATE insurance certificate with the Notice of Commencement of detailed assessment proceedings and the Bill of Costs on 13th April 2011. By the Points of Dispute of 10th May 2011, the Defendant notified the Claimants that they considered that CPD 32.5(2) had not been complied with. The redacted insurance certificate was provided on 18th November 2011 but that did not comply with the Practice Direction. On any view, even if the redacted certificate gave the information required, it was provided late. The information was provided on 18th November 2011 when it should have been provided on 13th April 2011. The assertion in the Points of Reply that relief from sanctions was not required because the Defendant had been informed by letter of 6th November 2009 that ATE insurance was in place was misconceived. That letter gave the information required by CPD 19 to be given during the course of proceedings when a party was not expected to disclose their assessment of prospects of success. CPD 32.5(2) required more information to be given following the conclusion of proceedings.[51]It seemed to have been accepted that knowing the level of the first and second stages of the insurance premium was relevant to the assessment of the reasonableness of the third stage premium which was claimed in this case. Mr Marven drew attention to Rogers v Merthyr Tydfil [2001] 1 WLR 808 in which Brooke LJ giving the judgment of the Court of Appeal held at paragraph 107:
“…although this court has never previously had to address this issue there is in principle no difference between a two-staged success fee (whose merits this court has consistently endorsed) and a staged ATE premium.”
It is the usual practice as indicated in CPD 32.5(1)(d) for a conditional fee agreement to be disclosed for the purpose of Costs proceedings in which a success fee is claimed. This should also apply to ATE insurance premiums.[52]Mr Marven submitted that as a matter of construction the requirement on the receiving party in CPD 32.5(2)(c) to disclose “the amount of the premium paid or payable” included all aspects and stages of the premium. The singular includes the plural. The amounts payable at earlier stages are aspects of the same premium. The earlier amounts, it was said, were subsumed in the premium payable at the later stage. It was submitted that such a construction would give effect to the purpose of CPD 32 which was to give the paying party information. They were entitled to this information to enable them to assess the reasonableness of the premium.[53]Mr Marven contended that the Master was right to hold that CPD 32.5(2) had not been complied with and to disallow the claim for the insurance premium.[54]Mr Marven contended that the Master did not err in refusing to give the Claimants relief from sanctions. They needed relief for both the lateness in serving information about the ATE insurance and for the inadequacy of the information supplied. The information was provided seven months late. The explanation for the redaction provided by the Claimants’ solicitors on the first day of the costs hearing, commercial sensitivity, was not given before that date. The reasoning of the Master for refusing relief from sanctions was not erroneous.[55]Mr Marven contended that the Master was right to consider that the assessment of risk at 55% was too high. He drew attention to C v W [2008] EWCA 1129 in which the principal ground on which the appellant challenged the calculation of a success fee was that the Defendant had already admitted liability at the time the CFA was entered into. “Winning” was defined in terms of the Claimant succeeding in recovering damages from his opponent. C v W was a high value personal injury claim. Taking all relevant matters into account Moore-Bick LJ assessed the risk in overall terms at 17% resulting in a success fee of 20%.[56]Mr Marven contended that the risk factors in this case were unconvincing. It was inconceivable that the Claimants would come away with nothing. Bearing in mind the definition of “win” which would trigger the success fee for solicitors and counsel, both would be likely to earn a success fee. The Master’s assessment of a 40% success fee for solicitors which in broad terms reflected a 71% prospect of success was reasonable. The size of the claim and the alleged complexity do not of themselves add to the risk of losing as observed by Moore Bick LJ in C v W at paragraph 15.[57]It was said on behalf of the Defendant that a lower success fee for counsel of 20% was justified. Counsel had a four stage success fee. By the time counsel’s CFA was entered into, Stage 1 had already past. The Master was right to differentiate between solicitors and counsel on the basis of the difference in consequences for them if a Part 36 offer was not beaten. Counsel would be paid normal fees after receipt of the notice of the Part 36 payment into Court unless the offer or payment had no effect on the costs awarded by the court, in which case counsel would also receive a success fee in respect of that work. However solicitors would not be paid their basic charges for the work done after receipt of notice of the offer.[58]Mr Marven submitted that the Master got the percentage success fees allowed for solicitors and counsel about right. The assessment was within his margin of discretion.

Discussion and Conclusion

[59]The only grounds in which an appeal from the Master would be allowed are those in CPR 52.11(3): that his decisions were(a) wrong or(b) unjust because of a serious procedural irregularity. The latter is not material to the appeal in this case. Accordingly the Claimants must establish that the Master made an error of law or of fact or that in exercising his discretion he took into account matters which should have been left out, omitted matters which should have been taken into account or reached a conclusion which was one which no reasonable Master properly applying the correct legal principles to the relevant facts could have reached.

The Insurance Premium

[60]The Master held that the Claimants had failed to comply with CPD 32.5(2)(c). The redacted insurance certificate served on the Defendant with their Reply to Points in Dispute did not comply with the requirements of the Practice Direction as the amounts of the premium for the two earlier stages before that for which the premium was claimed were not shown. In any event a certificate complying with the Practice Direction was not served at the time specified, with the Bill of Costs.[61]Whether the Master erred in deciding that the redacted insurance certificate did not comply with the Practice Direction turns on the proper construction of CPD 32.5(2)(c).[62]CPR 44.15 requires a party who seeks to recover an additional liability to provide information about the funding arrangement to the court and to other parties as required by a rule, practice direction or court order. CPD 19 provides that where a party has entered into a funding arrangement (the definition of which includes an insurance policy) before issuing proceedings must provide certain information about the arrangement with the Claim Form. There is no requirement at that stage to specify the amount of the additional liability separately nor to state how it is calculated. In their Reply to the Defendant’s Points of Dispute, the Claimants asserted that by letter dated 6th November 2009 the Defendant was notified of the insurance premium, including the applicable stages for the increases in premium and that Notice of Funding for the premium was filed and served on 15th January 2010. This information no doubt complied with CPD 19.4(3). However, information required to be provided about insurance before proceedings are concluded does not include the costs of cover. This could disclose the assessment of the prospects of success. The requirements for material to be provided for a detailed assessment of costs where an additional liability of the cost of an insurance premium is claimed are different when the court has finally determined the matters in issue.[63]CPR 47.6(1) provides:
“Detailed assessment proceedings are commenced by the receiving party serving on the payable party- (a) Notice of commencement in the relevant practice form; and (b) A copy of the bill of costs.”
CPD 32.7 provides:
“If a detailed assessment is in respect of both base costs and an additional liability, the receiving party must serve on the paying party…the documents listed in paragraph 32.3 and the documents giving relevant details of an additional liability listed in paragraph 32.5.”
Paragraph 32.5 provides that the relevant details of an additional liability where that liability is an insurance premium is a copy of the insurance certificate. A letter or a Notice of Funding do not comply with this requirement as contended in the Reply to Defendant’s Point of Dispute.[64]Did the redacted certificate which showed the amount of premium paid and payable at the stage at which the litigation was concluded comply with CPD 32.5(2)(c)? The policy summary served with the certificate provides:
“The premium is payable at the conclusion of this case. … THE MEANING OF WORDS USED IN THIS INSURANCE Where the following words appear in this certificate they shall mean:- Premium The amount specified at Premium (a) shall be payable if the Legal Action is settled completely prior to the issue of proceedings subject only to agreement or assessment of costs; the amount specified in (b) shall be payable if the Legal Action is settled after proceedings have been issued but more than 45 days before the date listed by the Court for the commencement of the trial; the amount specified in (c) shall be payable if the legal action is settled 45 days or less before the beginning of the trial as listed by the Court or is heard at trial.”
On the insurance Certificate three different amounts of total premium payable were specified under (a), (b) and (c) respectively. Only one premium was payable. Its amount depended on the stage at which the case was concluded.

(c) figure:

“…is a global premium” and that: “It was set by the insurers as one premium, albeit in stages…”
The premium payable for insurance is a specific amount. There were three premiums set out in the redacted certificate. Which was payable depended upon the stage at which the case was concluded. The requirement in CPD 32.5(2)(c) is that the certificate shows the amount paid or payable. The two are alternatives. If a premium has been paid there is no requirement that the disclosed certificate should show the amount which would have been payable if the proceedings had been concluded at an earlier stage. In this case it appears from Item 62 on the Bill of Costs that the obligation to pay a premium of £60,375 had crystallised. Premiums in the amounts which would have been paid or payable had the proceedings concluded at an earlier stage, were not “paid or payable”. In my judgment the Master erred in concluding that the Claimants had not complied with CPD 32.5(2)(c) by not providing the unredacted insurance certificate and relying on the redacted certificate showing only the premium with was paid. THE MEANING OF WORDS USED IN THIS INSURANCE Where the following words appear in this certificate they shall mean:-

Premium

[65]The Master relied on a purposive construction of CPD 32.5(2)(c) to conclude that the Practice Direction required disclosure not only of the premium paid but of premiums which would have been payable had the proceedings concluded at an earlier stage. The purpose relied upon was to enable the receiving party:
“…to have information which entitles them to come to a conclusion as to what is a reasonable premium.”
[66]In my judgment there is a distinction between the mandatory requirement on the receiving party claiming an additional liability of an insurance premium to provide a copy of the insurance certificate showing the amount of the premium paid or payable and evidence, which may include amounts payable if proceedings had been concluded at earlier stages, which would enable a paying party to assess the reasonableness of the premium claimed as an additional liability. The premiums which would have been payable to the particular insurer used by the Claimants had the case concluded at an earlier stage may well be just one, albeit an important, piece of evidence relevant to assessing the reasonableness of the premium claimed. CPD 40.14 provides:
“The court may direct the receiving party to produce any document which in the opinion of the court is necessary to enable it to reach its decision. These documents will in the first instance be produced to the court, but the court may ask the receiving party to elect whether to disclose the particular document to the paying party in order to rely on the contents of the document, or whether to decline disclosure and instead rely on other evidence.”
This direction reflects the approach adopted by Hobhouse J in Pamplin v Express Newspapers Ltd (Costs) [1985] 1 WLR 689 at p697 to reliance on privileged documents. If necessary the Defendant could have made an application for disclosure of the unredacted certificate of insurance.[67]It appears from paragraphs 7 and 8 of his judgment that the Master considered that the Claimants had not complied with CPD 32.5(2)(c) because the required information regarding the insurance premium had not been provided. At paragraph 8 he then referred to the possibility of an application for relief from sanctions. There was no mention by the Master at that stage of a breach of the CPR or CPD by reason of failure to serve the insurance certificate on time. That is unsurprising as in accordance with his ruling a certificate complying with CPD 32.5(2)(c) had not been served until the unredacted certificate was produced to him just before the hearing. The Application for

Relief from Sanctions

[68]CPR 3.9 provides that on an application for relief from sanctions the court will consider all the circumstances including those specified in the rule. It is apparent from the judgment of the Master that his finding that the Claimants were obliged by CPD 32.5(2)(c) to disclose the amounts payable at each stage at which a higher premium was payable under the ATE policy played an important role in his decision not to grant relief.

The Application for Relief from Sanctions

(a) the Master observed that:

“It is vitally important that that information required by the Practice Direction is available to the receiving party.”
As for whether there was a good explanation for the failure to comply with the CPD, the factor referred to in CPR 3.9(1)(d), the Master rightly observed that there was no explanation why the certificate was not provided with the Bill of Costs on commencement of the assessment. Thus the failure to comply with the requirement that the certificate be served with the Bill of Costs appears to have been taken into account by the Master. As for CPR 3.9(1)(g), the Master considered that if he were to grant relief from sanctions, the detailed assessment would have to be adjourned with costs consequences. In considering CPR 3.9(1)(h), the effect which the failure to comply had on each party, the Master held that the Defendant had been unable to prepare some of its submissions which were dependent on knowing the amounts of premium specified for the first two stages in the ATE insurance certificate. That had caused prejudice. He found that the information had not been disclosed in time. He held that the document which complied with CPD 32.5(2) “has only just been produced now”. From this observation it is clear that the Master was basing his decision that the certificate was not produced on time on the proposition that the relevant document was not the redacted certificate supplied a month before the hearing but the unredacted certificate provided to him shortly before the hearing.[69]Although there was no breach of CPD 32.5(2)(c) in providing the redacted rather than the unredacted insurance certificate there was a clear breach of the requirement of CPR 47.6 read with CPD 32.4 and 32.5(2) to serve the insurance certificate with the Bill of Costs. The Notice of Commencement and Bill of Costs were served on 13th April 2011. The redacted insurance certificate, which I have held complied with CPD 32.5(2)(c), was not served until six months later, 18th November 2011.[70]The Master’s consideration of whether he should grant relief from the sanction of disallowing the claim for the insurance premium was based on two false premises. First, that there had been a breach of CPD 32.5(2)(c) by serving the insurance certificate in redacted form. Second, that a document complying with CPD 32.5(2) was supplied just before the hearing when the unredacted certificate was provided. In light of the finding that the decision of the Master that relief from sanctions should not be granted was based on two erroneous conclusions his decision not to grant relief cannot stand and is set aside.[71]However, on any view, the certificate of insurance was served late in breach of the CPR and CPD. The importance to be attached to compliance with the CPR and CPD is shown by the serious consequences which flow from breach absent relief from sanctions. In Supperstone v Hurst and Hurst [2008] Costs LR 572 Floyd J observed at paragraph 39:
“I agree that relief from sanctions should not be granted lightly and any party who fails to comply with the CPR runs a significant risk that he will be refused relief. Thus if a party does not have a good explanation, or the other side is prejudiced by his failure, relief from sanctions will usually be refused. It is vitally important to the administration of justice that the rules of procedure are observed.”
However the following dictum of Mance LJ in Hansom and Others v Makin and Wright [2003] EWCA Civ 1801 at paragraph 20:
“…at the end of the day, the right approach is to stand back and assess the significance and weight of all relevant circumstances overall, rather than engage in some form of head-counting of circumstance.” is important and useful guidance. In Stolzenberg and Others v CIBC Mellon Trust Co. Ltd and Others [2004] EWCA Civ 827 Arden LJ held at paragraph 155: “The dictum of Mance LJ makes it clear that although the court must go through each of the matters in the list in CPR 3.9 as a separate and distinct exercise the result is not ascertained by adding up the ‘score’ of either side on each point. If that were the right method, there would be a danger of double-counting. The object of CPR 3.9 is to ensure that all the right questions are asked. That produces ‘structured decision-making’. In addition to going through the subparagraphs of CPR 3.9, the court must ask itself if there are any other circumstances that need to be taken into account. However, having done all this, the court is then also required to stand back and form a judgment to the aggregate of the relevant circumstances that have been identified in going through the list to see whether it is in accordance with the overriding objective in the CPR to lift the sanction. This overall ‘look see’ is simply the overriding objective in action.”
[72]Standing back and taking into account all the relevant circumstances including those in CPR 3.9 can it be said that a costs Judge, properly directing himself or herself, could only reach one conclusion on whether relief from sanctions should be granted in this case? The breach of the CPR and CPD in this case was to serve the redacted insurance certificate on 18th November 2011, one month before the detailed assessment hearing rather than on 13th April 2011, eight months before the hearing.[73]The Master considered all the matters required by CPR 3.9(1)(a) to (i) to be taken into account in deciding whether to grant relief from sanctions. His decision that the Claimants had not provided the insurance certificate required to enable them to claim the insurance premium as an additional liability until just before the hearing led him to conclusions adverse to them when considering CPR 3.9(1)(a), the interests of the administration of justice, whether the failure to comply was intentional, (c), (d) whether there is a good explanation for the failure, (h) the effect which the failure to comply had on each party and (i) the effect which the granting of relief would have on each party. In considering CPR 3.9(1)(b), the Master held that the application for relief was not made promptly as on any view the certificate was supplied late. The Master held that on the facts of this case nothing really turns on CPR 3.9(1)(e), the extent to which the party in default has complied with other rules, practice directions, court orders and any relevant pre-action protocol. As for CPR 3.9(1)(f), the failure to comply with the CPD was caused by the Claimants’ representative. The Master did not consider that this factor took “the matter a great deal further”. He held that the trial date, the consideration in CPR 3.9(1)(g), would have to go off.[74]The two important items listed in CPR 3.9 referred to by Floyd J in Supperstone, are the circumstances to be taken into account under CPR 3.9(1)(d) and (h). The explanation for the failure to serve the certificate with the Bill of Costs was that advanced in the Reply to the Defendant’s Points in Dispute: the Claimants’ solicitors thought that the requirement of CPD 32.5(2) had been complied with by the letter of 6th November 2009 in which they notified the Defendant that ATE insurance was in place and that different premiums were payable at identified stages. Further, the premium paid had been listed in the Bill of Costs. The explanation for the default is therefore mistake.[75]The information apparently given in the Claimants’ letter of 6th November 2009 was that ATE insurance was in place and that the premium was to increase at stages which were specified. The amount of the premium was included in the Bill of Costs. No complaint has been made that the Claimants failed to notify the Defendant of the maximum extent of the cover or what was covered by the policy. Accordingly, although it should have been given in a certificate, the substance of the required information appears to have been given to the Defendant in the letter of 6th November 2009 and the Bill of Costs of 13th April 2011. Whilst it is understandable that the Defendant may not have wished to encourage the Claimants to remedy their failure of compliance with CPD 32.5(2)(c) by asking for the insurance certificate, once it was served on 18th November 2011 they could have asked for disclosure of the unredacted certificate. If it was refused the Master could have used the procedure in CPR 40.14 to obtain disclosure of or information about the level of premiums which would have been payable at earlier stages. Further, the Defendant had at least a month before the hearing to obtain evidence to challenge the reasonableness of the premium, the amount of which had been known since 13th April 2011.[76]The prejudice suffered by the Defendant by the late disclosure of the certificate is likely to have been delay in knowing whether the Claimants would be in a position to pursue their claim for the additional liability of the insurance premium and therefore whether time and money should be expended on obtaining evidence to challenge its reasonableness. Such a stance is consistent with the Defendant’s Points of Dispute in respect to the Claimants’ Bill of Costs. However, once the redacted certificate was served there was nothing to prevent the Defendant from asking for disclosure of the unredacted certificate and from obtaining evidence to challenge the reasonableness of the premium. If needed the Defendant could have applied for an adjournment to obtain such information. Since the need for an adjournment would have been caused by the Claimants it is highly likely that they would have had to bear the costs.[77]The prejudice suffered by the Claimants if relief from sanctions were not granted is that they are unable to pursue their claim for the insurance premium of £60,375. This is not an insubstantial amount. Bearing in mind that any prejudice to the Defendant caused by late service of the certificate could be reduced or eliminated by case management measures, having regard to the overriding objective looking to see the relevant circumstances overall, in my judgment, properly directing himself or herself, on the law and the relevant facts, a costs Judge would conclude that relief from sanctions for failing to serve the insurance certificate on the due date, the default in this case, should be granted.

The Success Fees

[78]The basis for the Master reducing the Claimants’ solicitors’ success fee was that in his view the “chance of winning” was somewhere in the region of between 70% and 75% and not the 55% in their risk assessment. In reaching this conclusion in my judgment the Master erred in holding that the case “really related to the quantification of damages”. The claim for £239,816.98 was made on the three alternative bases set out earlier in this judgment. One was loss alleged to have been caused by the supply of admittedly defective goods. The Defendant denied causation of the loss claimed. The second was that the Defendant engaged the Claimants to co-ordinate rectification of all problems experienced by the end customer and that in pursuance of this engagement the Claimants provided services. It was alleged that it was an implied term of this contract that the Defendant would pay a reasonable charge for these services. Alternatively it was alleged that the Claimants provided services to the Defendant at their request and that the Claimants were entitled to a reasonable sum for those services. In all cases the total sum claimed was £239,816.98.[79]At the time of both the solicitors and counsel entering into their CFA the Defendant denied that they were liable to pay the Claimants the sum claimed or any sum. They denied any contractual relationship with the Second Claimant. By their Defence served after the CFAs were entered into the Defendant denied that any breach of contract by them caused the loss and damage claimed. Further the Defendant denied that they engaged the Claimants to rectify problems experienced by the client. They denied that they engaged the Claimants to carry out any remedial work or that there was any further contract between them. It was denied that the Claimants provided services to the Defendant at their request or at all. The Defendant denied that the Claimants were entitled to make a reasonable charge or any charge. They denied that the alleged loss and damage was caused by the matters complained of. Liability for the sums claimed and causation of loss were denied. In my judgment the Master erred in concluding at paragraph 18 that “the parties appear to have agreed that this case really related to the quantification of damages”.[80]In my judgment the mistaken view taken by the Master that the case was about the quantification of damages and not liability and causation led him to underestimate the risks of the Claimants losing. Although a settlement for an award of damages of £1 would have triggered the success fee, a realistic view of that happening has to be taken. There was nothing in the material before the Master to indicate that the Claimants would have settled their claim for £1 or that a court would have awarded that sum. The likelihood was that, as in fact occurred, settlement would only be achieved for a payment of a significant proportion of the sum claimed. At the time of entering into the CFA, the solicitors recorded in their Risk Assessment of 9th September 2009 that:
“The basis of the claims has been clearly explained to the proposed Defendant who after having considered them has rejected them both as to liability and quantum (as evidenced by the exchange of correspondence to date and see document headed ‘Stated reasons given by Zumtobel not to pay’).”
[81]In Motto and Others v Trafigura Ltd and Another [2012] IWLR 657 Lord Neuberger held at paragraph 127:
“When it comes to determining the prospects of a claim succeeding, there is, for the sort of reasons just discussed, a risk of becoming beguiled by the apparent accuracy of an assessment, which is expressed in figures and appears to be logically based. In the end, however, the determination is a matter of judgment, which involves arriving at an overall assessment by weighing up various factors, which are inherently difficult to quantify, not least because the quantification will be a matter of opinion on which reasonable people could differ (sometimes quite substantially), and because the factors are not as independent of each other as might first appear.”
[82]The Risk Assessment referred to “litigating a case of this size” and that “the subject matter of the dispute is technical, specialised and the trial is likely to involve lighting expert evidence.” As was explained by Moore-Bick LJ in C v W [2009] 4 AER 1129 at paragraph 15, it would be wrong to increase the percentage success fee to reflect the size or complexity of the claim.[83]The Master rightly approached the question of the reasonableness of the success fee on the basis that “the case did go a long way to trial”. He also took into account the starting figure for a success fee from the ready reckoner and factored in something for the late settlement and the fact that the CFA had staged success fees in reaching a figure based on the ready reckoner uplift for his assessment of success at between 70% and 75%. However, having regard to the failure of the Master to appreciate the basis of the claims made by the Claimants and the position of the Defendant before the issue of proceedings when the CFAs were entered into, in my judgment he erred in overestimating the prospects of success. Applying this approach to what in my judgment is the overall correct assessment of the chance of winning at 60%, the success fee would be 67% accordingly I set aside the Master’s award of 40% success fee for the solicitors and replace it with one of 67%.[84]Counsel’s CFA was based on the solicitors’ risk assessment. For the reasons given, in my judgment the Master erred in that he based his decision on risk on the premise that what was in issue in the case was quantum only. However he did not err in considering that some distinction should be made between solicitors’ and counsel’s success fee. Mr Farber fairly recognised that a reduction in counsel’s success fee should be made to reflect the fact that if a Part 36 offer were not beaten counsel would still receive his standard fee for work undertaken after payment in and a success fee if the Part 36 offer had no effect on the costs order, whereas the solicitors would receive nothing. Mr Farber agreed that this difference would properly be reflected by a lesser success fee. He gave the figures of at most 5% and 10% to illustrate the point. In my judgment the overall difference between the risks assumed by solicitors and counsel would properly be reflected by a lesser success fee of 7% for counsel.[85]The other difference relied upon by the Master was that the first Stage of counsel’s success fee was never going to apply because the Claimant had already issued or was about to issue proceedings when counsel entered into the CFA. Counsel’s CFA had four stages compared with the solicitors’ three. Having regard to the fact that the case settled just a few days before trial, in my judgment the stageing of counsel’s success fee does not support a reduction in its percentage at the final stage.[86]Accordingly the Master’s allowance of a success fee of 20% for counsel is set aside and is replaced with one of 60%.

Conclusion

[87]The appeal is allowed.[88]The decision that the Claimants failed to comply with CPD 32.5(2)(c) by serving a redacted insurance certificate is set aside.[89]The decision not to grant relief from sanctions for failing to serve the insurance certificate in accordance with the CPR and the CPD is set aside and the Claimants’ application for relief from sanctions is granted.[90]The allowance of 40% and 20% success fees for solicitors and counsel respectively are set aside and replaced with success fees of 67% and 60%.[91]Anything remaining to be done in the detailed assessment of costs including the insurance premium claimed at Item 62 of the Bill of Costs and the assessment of the Claimants’ costs of the appeal which are ordered to be paid by the Defendant are remitted to Master Campbell or, if not practicable, to another Costs Judge. For the avoidance of doubt, Master Campbell is to have full discretion as regards the costs of the detailed assessment save that the Defendant is to pay the Claimants their costs of the appeal.