PART 36: PRACTICAL LAW VIDEO SPECIAL

In this Issue there are links to two videos that I have recorded for Practical Law, together with the transcripts of those interviews.

The links to the videos are only available until Thursday, 2 May 2024, and I thank Practical Law for allowing me free use of those for that period.

Part 36 offers: Overview

In this video, I describe the purpose and benefits of making Part 36 offers to settle and outline the basic requirements when making such offers and explain the implications of Part 36 being a self-contained code.

I look at the consequences of accepting a Part 36 offer late and of not accepting a Part 36 offer at all.

This video is 10 minutes long and does not deal with fixed costs cases, which are in a separate video.

Here is the link

– https://uk.practicallaw.thomsonreuters.com/w-043-0756

Part 36 Offers: Practical Differences Under the Fixed Recoverable Costs Regime

This is 16 minutes long and the video chapters are as follows:

• Part 36 under the fixed recoverable costs regime.
• Costs consequences if a claimant matches or beats its own Part 36 offer.
• Costs consequences if a claimant fails to beat a defendant’s Part 36 offer.
• Late acceptance by a defendant in a fixed recoverable costs case.
• Late acceptance by a claimant in a fixed recoverable costs case.
• Areas of uncertainty due to contradictory rules.
• Aspects of the rules which need rewriting.

Here is the link

– https://uk.practicallaw.thomsonreuters.com/w-043-0759

TRANSCRIPT OF PRACTICAL LAW VIDEO: PART 36 OFFERS: OVERVIEW

TRANSCRIPT OF PRACTICAL LAW VIDEO: PART 36 OFFERS: PRACTICAL DIFFERENCES UNDER THE FIXED RECOVERABLE COSTS REGIME

INSURER TO CUT OUT LAWYERS – SOME THINGS NEVER CHANGE

Here is an article from the Law Society’s Gazette – 9 December 2004

Some things never change…

FIXED RECOVERABLE COSTS: APRIL 2024 AMENDMENTS: PRACTICAL LAW VIDEO HERE UNTIL 19 APRIL 2024

Here is a link to my video recorded for Practical Law on Fixed Recoverable Costs: April 2024 Amendments.

This is only available via this link until this Friday, 19 April 2024, and is 25-minutes long.

Here are the subjects it covers:

• Inflation uprating of fixed recoverable costs.
• Changes relating to advocates’ fees.
• New rules regarding contracting out of fixed recoverable costs.
• Notable omission in relation to clinical negligence.
• Rule clarifications: inquest proceedings and company restorations.
• Existing challenges with the fixed recoverable costs regime.

Fixed Costs Zoominars : Next one this afternoon!

I am conducting a series of three 1-hour Zoominars dealing with Fixed Recoverable Costs and the cost for all three is £150 plus VAT, it is a £180.

The first one took place on 16 January 2024 and a link to the recording is available and covers amongst other things:  

– Contracting Out;

– Inquest Costs;

– Company Restoration Proceedings Costs;

– Counsels’ Fees on Late Settlement;

– Conflicting Provisions on Settlement Pre-Issue;

– Defendants’ Right to Costs if Discontinued Pre-Issue;

– Part 36;

– Track Allocation and Band Assignment;

– The Conundrum re Civil Proceedings unissued by 1 October 2023.

The next ones are:

Tuesday, 19 March 2024 at 4pm

Tuesday, 14 May 2024 at 4pm

The one this afternoon 19 March 2024 will cover the amendments to the Fixed Recoverable Costs Scheme coming in on 6 April 2024, including:

• Inflation uprated figures for all fast track and intermediate track claims, and the Noise-Induced Hearing Loss Scheme
• Advocates Fees in Cases Settled late or Vacated
• Fixed Recoverable Costs on Assessment
• Fixed Costs in Part 8 (Costs only claims)
• Inquests
• Restoring a Company to the Register
• Clinical Negligence
• Directions
• Length of Expert Reports
• Part 36
• Contracting Out
• Case Management
• Future Developments

As many colleagues as you like from your organisation can attend and recordings sent whether or not you attend.

To book a place, click here.

Fixed Recoverable Costs Autumn 2023 Extensive Course Material

You can also purchase my detailed Course Material on Fixed Recoverable Costs from Autumn 2023, fully updated to take account of recent changes.

The cost is £150 plus VAT total £180, and you can buy here.

Documents Subscription

I have updated completely the Documents, Videos, Agreements and Advices Menu and this contains 39 new Conditional Fee Agreements suitable for Fixed Recoverable Costs cases, covering Civil Litigation as well as Personal Injury and Clinical Negligence.

You can purchase the entire hyperlinked suite of all documents, and not just the Conditional Fee Agreements, here for £2,000 plus VAT for the first year.

If you wish to renew for 2025 and beyond the cost reduces to £1,000 plus VAT to reflect the fact that much of the benefit is gained in the first year.

This subscription includes the thrice weekly Newsletter Kerry On Costs, Regulation, Legal Systems And So Much More…

Kerry on Costs Regulation Legal Systems and So Much More

The above Newsletter subscription itself costs £500 plus VAT for each year and you can purchase it here.

Subscription to the Documents Service, or the Newsletter Service, includes free attendance for as many people as you want from your organization at the two upcoming Zoominars, plus the recording of the Zoominar which has already taken place.

CLOSE THE COMMERCIAL COURT TO FOREIGN LITIGANTS UNTIL COUNTY COURT BACKLOG IS CLEARED

This appeared in the newsletter KERRY ON COSTS, REGULATION, LEGAL SYSTEMS AND SO MUCH MORE… which comes out electronically 2 or 3 times a week. Subscription for a year – so to 31 March 2025 is £500 plus VAT – total £600.

You can find out more and book here.

If you would like 4 sample copies free, please contact Kerry on kerry.underwood@lawabroad.co.uk.

All people in your organisation are included in that price. It includes free access to Zoominars – the next ones-on Fixed Costs are on

plus a recording of the one that has already taken place.

The Ministry of Justice: Civil Justice Statistics Quarterly  published in Issue 230, showed, amongst other things, that the average time for a Small Claim to reach trial or first hearing is now 55.8 weeks, that is over one year.

That is an average and there is anecdotal evidence that in some courts in Southern England the time is around two years.

The figures appear not to take into account hearings that are adjourned, because there is no Judge to hear them.

Any which way, it is a hopeless failure of the system.

Throw in the Pre-Action Protocols, and you can add another three months.

The reality is that anyone can avoid paying a debt for the best part of 18-months simply by filing some sort of Defence, and even if they lose at the end of the day, or more likely admit shortly before trial, no costs are payable.

The Small Claims Limit is £10,000, which is not a small amount for most individuals or small businesses.

These delays do huge harm to the functioning of businesses and the domestic economy generally, which is driven by small- and medium-sized enterprises.

Evening and weekend courts should be set up to clear this backlog with former judges being brought in to assist.

It is this sharp end that really matters, not the big fee Commercial Court where 64% of cases had at least one non-UK party and 40% were entirely non-UK based.

They may earn fat fees for lawyers, but this is an intolerable use of resources when the County Courts are literally and metaphorically falling apart.

Am I saying that Commercial Court Judges should be freed up to assist the County Court backlog?

If necessary, yes.

FIXED RECOVERABLE COSTS – CPR 45.13

This appeared in the newsletter KERRY ON COSTS, REGULATION, LEGAL SYSTEMS AND SO MUCH MORE… which comes out electronically 2 or 3 times a week. Subscription for a year – so to 31 March 2025 is £500 plus VAT – total £600.

You can find out more and book here.

If you would like 4 sample copies free, please contact Kerry on kerry.underwood@lawabroad.co.uk.

All people in your organisation are included in that price. It includes free access to Zoominars – the next ones-on Fixed Costs are on

plus a recording of the one that has already taken place.

In my piece – PART 36, FIXED RECOVERABLE COSTS AND CLAIMANT’S LATE ACCEPTANCE – I looked, amongst other things, at the fact that both parties can get costs from each other for the same work!

Simon Gibbs, the Expert Defence Costs Lawyer, whose excellent blog is here, in his piece – Fixed Recoverable Costs – CPR 45.13 looked at the apparently unintended prospect of a double sanction for unreasonable conduct, which can arise because both parties get costs, and as we have seen in the lengthy article above, both parties can get costs for the same work in the same stage, as that is how late acceptance of a Part 36 offer works.

Thus, a claimant accepts late in the same Stage that the offer expired.

Both parties get full costs from the other side for all the work in that stage (yes, honestly!)

Let us say that the defendant successfully argues unreasonable conduct.

Does the defendant get both a 50% increase in its own costs for that Stage, and a 50% reduction in the costs that it has to pay the claimant for that Stage?

On the face of it, yes.

As will be seen above, we have no idea whether the defendant gets costs based on the amount accepted, or claimed, as there are directly contradictory rules on this point within the Civil Procedure Rules.

Let us make it easy and take a Stage 1 personal injury case, where costs are fixed, as compared with a civil case where costs are capped, and not fixed, which makes it much more complicated.

The claimant claims £100,000 and accepts late for £40,000.

The claimant’s conduct is held to be unreasonable.

These are the consequences:

Difference between defendant’s costs and claimant’s costs:

Script of explanation to client:

I have good news for you. We have won your case and accepted the other side’s offer of £40,000 which you were very happy about.

I was a bit busy and was a few minutes late accepting their offer, and I am afraid that has cost you £23,640.

I was five minutes late and so the defendant was on an hourly rate of £283,680. Sorry!

You will receive only £16,360 from the other side.

The good news is that I capped all my charges to you at 30% of damages, so that is £12,000.

This means that you will receive £4,360 out of the £40,000.

PART 36, FIXED RECOVERABLE COSTS AND CLAIMANT’S LATE ACCEPTANCE

This appeared in the newsletter KERRY ON COSTS, REGULATION, LEGAL SYSTEMS AND SO MUCH MORE… which comes out electronically 2 or 3 times a week. Subscription for a year – so to 31 March 2025 is £500 plus VAT – total £600.

You can find out more and book here.

If you would like 4 sample copies free, please contact Kerry on kerry.underwood@lawabroad.co.uk.

All people in your organisation are included in that price. It includes free access to Zoominars – the next ones-on Fixed Costs are on

plus a recording of the one that has already taken place.

I am very grateful to Simon Gibbs, the Expert Defence Costs Lawyer, whose excellent blog is here, for his input into this piece, and, frankly, for putting me right.

I had assumed, wrongly, that a claimant’s late acceptance within the same stage of a Fixed Recoverable Costs case would have no adverse costs consequences as the moment the claimant enters that stage, they get the full fixed costs for that stage and that remains the case, and the sum remains the same, until the next stage is entered.

That would seem to me logical and sensible, which is no doubt why I wrongly assumed that that was the end of the story.

What in fact happens, bizarrely in my view, is that late acceptance, even by a day, means that both parties get Fixed Recoverable Costs from each other for that stage.

What the Civil Procedure Rules could have said, but do not, is that where a claimant accepts a defendant’s offer after the expiry period, but within the same stage that it was made, then neither party gets costs for that stage.

That is not what it says, and you might think that it is the same hill of beans, as both parties getting costs from each other for the same stage, cancels each other out. That is not necessarily the case.

Not only does it mean that the claimant gets nothing for that stage, but they will actually get less than nothing as the defendant’s costs for that stage will always be higher than those of the claimant.

I make that statement boldly, but I will look later at the stark contrasts between CPR 45 and CPR 36, which means that I simply do not know if that is correct.

The logic behind me saying that is that the claimant receives costs on the basis of the amount settled for, that is the value of the Part 36 offer, whereas the claimant pays costs on the basis of the sum claimed.

It is certainly the case that the claimant receives costs on the basis of the amount settled for, but in a Part 36 case, it is unclear whether the claimant pays costs on the basis of the sum claimed, or the sum settled for, and I look at that later.

It is hard to think of any case where the Part 36 offer by the Defendant is going to be for everything claimed by the claimant, and therefore, one would always expect the amount settled for to be less than the amount claimed.

The relevant Rules in relation to this point are CPR 36.23(3), (8), and (9).

These read:

“(3) Subject to paragraphs (4) and (5), where a defendant’s Part 36 offer is accepted after the relevant period—

(a) the claimant is entitled to—

                             (i) the fixed costs in Table 12, Table 14 or Table 15 in Practice Direction 45 for the stage                                  applicable at the date on which the relevant period expired; and

                             (ii) any applicable additional fixed costs allowed under Section I, Section VI, Section VII or                          Section VIII incurred in any period for which costs are payable to them; and

(b) the claimant is liable for the defendant’s costs in accordance with paragraph (8).

(8) Subject to paragraph (9) where the court makes an order for costs in favour of the defendant, the defendant is entitled to—

(a) the fixed costs in Table 12, Table 14 or Table 15 in Practice Direction 45 for the stage applicable at the date of acceptance; and

(b) any applicable additional fixed costs allowed under Section I, Section VI, Section VII or Section VIII incurred in any period for which costs are payable to them,

less the fixed costs to which the claimant is entitled under paragraph (3)(a)(i) or (4).

(9) Where—

(a) an order for costs is made pursuant to paragraph (3); and

(b) the stage applicable at the date on which the relevant period expires and the stage applicable at the date of acceptance are the same,

the defendant is entitled to the fixed costs applicable to that stage.”

Thus, the claimant does indeed get all its fixed costs of the stage in which the Part 36 offer is accepted, whether accepted in time, or late.

That is the effect of CPR 36.23(3)(a)(i).

So far, so good.

However, CPR 36.23(3)(b) provides that the claimant is liable for the defendant’s costs in accordance with Paragraph (8).

Paragraph (8) provides that where the court makes an order for costs in favour of the defendant, the defendant is entitled to the fixed costs for the stage applicable at the date of acceptance less the costs due to the claimant for the same stage.

The very fact that the Rules state that, suggests that the costs may be different, for the reasons set out above, that is a claimant getting costs on the basis of the amount settled for, and the defendant getting costs on the basis of the amount claimed.

Otherwise, as mentioned above, it would have been far simpler to say that where an offer is accepted late within the same stage, neither party gets costs for that stage.

Paragraph (8) is subject to Paragraph (9) which provides at (b) that where the stage application at the date on which the relevant period expires and the stage applicable at the date of acceptance are the same, the defendant is entitled to the fixed costs applicable at that stage.

Again, that suggests that the defendant gets its costs on the basis of the amount claimed, and not settled for, which is what CPR 45.6(2) and (3) say and I set this out below:

“(2) For the purpose of assessing the costs payable to a defendant by reference to the fixed costs in Table 12 and Table 14—

(a) “value of the claim for damages” and “damages” shall be treated as references to the value of the claim, as defined in paragraph (3); and

(b) if the claim is discontinued, a reference in Table 12 or Table 14 to the stage at which a case is settled shall be treated as a reference to the stage at which the case is discontinued.

(3) For the purposes of paragraph (2)(a), ‘the value of the claim’ is—

(a) the amount specified in the claim form, without taking into account any deduction for contributory negligence, but excluding—

(i) any amount not in dispute;

(ii) interest; or

(iii) costs;

(b) if no amount is specified in the claim form, the maximum amount which the claimant reasonably expected to recover according to the statement of value included in the claim form under rule 16.3;

(c) if the claim form states that the claimant cannot reasonably say how much is likely to be recovered—

(i) £25,000 in a claim to which Section VI applies; or

(ii) £100,000 in a claim to which Section VII applies;

(d) if the claim has no monetary value—

(i) the applicable amount in rule 45.45(1)(a)(ii) in a claim to which Section VI applies; or

(ii) the applicable amount in rule 45.50(2)(b)(ii) in a claim to which Section VII applies; or

(e) if a claim includes both a claim for monetary relief and a claim which has no monetary value, the applicable amount in sub-paragraph (d) taken together with the applicable monetary value in sub-paragraph (a), (b) or (c).”

I return to that subject later.

So, that appears to be that, although I am not sure what CPR 36.23(9) brings to the table that is not already covered by CPR 36.23(8).

The Effect

A non-personal injury claimant receives an offer in Stage 1 which expires a day before the Defence is filed, triggering the matter to go into Stage 3, something which the defendant can control and engineer.

The claim is for £100,000 and settles for £50,000 due to uncertainties which both parties accept and which would have led to the matter being assigned to Complexity Band 4.

The claimant accepts in time.

The claimant will get Stage 1 costs to be assessed, not fixed in non-personal injury matters, but subject to a cap at the Fixed Recoverable Costs sum for Stage 1.

So, the client gets £50,000 plus assessed costs subject to a cap of £13,300, plus VAT, that is

£9,300; plus

8% of damages; plus

VAT.

Let us assume that the claimant accepts two days late and is now in Stage 3, because the filing of the Defence has moved the matter from Stage 1 to Stage 3.

Please do not get me started on why Stage 3 is called Stage 3 rather than Stage 2. I have written about that extensively, and this piece will be long enough in any event.

It appears that the defendant gets £27,000, being the fixed fee of £13,000; plus

14% of the £100,000 damages claimed.

That is subject to a further discussion below.

What does the claimant get?

I do not know.

The maximum is clearly £13,300 as set out above, but whether that becomes fixed, and not capped, as the matter is now in Stage 3, retrospectively fixed in Stage 1 costs, I do not know.

As the time for acceptance expired in Stage 1, is the claimant only entitled to assessed costs on the basis of work done, subject to the Stage 1 cap, or to fixed Stage 1 costs?

Either way, the claimant is at least £13,700 plus VAT worse off, so that is £16,440, or one third of the damages in this example.

In personal injury cases, the Stage 1 costs are fixed, and Qualified One-Way Costs Shifting applies.

If the claimant accepts in time, she/he gets:

If the claimant accepts late in Stage 3, then the position is:

Thus, two days, when maybe no work at all was done, costs to the claimant of £33,560, that is virtually half the award.

What happens if the claimant accepts late in the same Stage – let us assume Stage 1 – and proceedings have been issued?

I make this qualification about proceedings being issued as it remains unclear as to whether a defendant can ever recover costs in an un-issued matter.

In a personal injury claim on the above figures, it would look like this:

Thus, the claimant owes the defendant £4,800 which will be set off against damages.

Incidentally, the claimant’s solicitor could presumably claim a success fee of up to £12,500, being 25% of the damages, and less than the maximum 100% uplift on Solicitor and Own Client costs, even on a recovered costs basis, even though in reality, the claimant is paying out costs to the defendant!

In a non-personal injury case, each side’s costs will be assessed if the matter resolves in Stage 1, but after expiry of time for accepting the defendant’s Part 36 offer.

However, the claimant’s costs would be capped at £15,960 including VAT and the defendant’s costs at £20,760 including VAT, even if the defendant had done only a fraction of the work that the claimant had done.

In non-personal injury matters, there is no damages-based cap on the amount of the success fee that the solicitor can charge, and therefore, the success fee alone in the above case could be £15,960 even though in reality, the claimant is receiving no costs, and is paying out £4,800 net to the defendant.

There will be some interesting Solicitor and Own Client challenges under the Solicitors Act 1974 coming up.

Having said all of that, I am not sure that I am correct in stating that the defendant gets Fixed Costs on the basis at the amount claimed.

This is unquestionably the general position in Fixed Recoverable Costs cases, as that is what CPR 45.6(2) and (3) say, and I have set those provisions out above.

However, in a stand-alone throw away provision, CPR 36.23(6) says:

“(6) Fixed costs shall be calculated by reference to the amount of the offer which is accepted.”

It is not clear whether that refers only to a claimant’s costs, or to both parties’ costs, including the defendant’s costs, and CPR 36.23(6) appears after CPR 36.23(3) which I have set out above, and which deals with late acceptance.

That would have the bizarre effect that the more the defendant’s solicitors get the settlement down, the less they get in costs, albeit the defendant will be paying lower damages.

So, £100,000 is claimed, and the claimant accepts £90,000 late in Stage 3 when the time for accepting expired in Stage 1.

The defendant’s costs are £25,600 plus VAT comprised of:

Same claim, same timescales, but the claim settles for £25,000.

The defendant gets:

Thus, for achieving a far better result for the defendant, the defendant’s Fixed Recoverable Costs are reduced by £9,500 plus VAT.

If the claimant accepted £100, then the defendant would get:

If the claimant accepted nothing and discontinued the claim, then the defendant would get:

In any event, there is no doubt that rather than softening the effect of late acceptance within the same stage, as I originally thought, the new scheme is very much harder on late accepting claimants than the old scheme.

A late accepting defendant still suffers no penalty whatsoever.

With all due modesty, I reckon I know a little bit about Fixed Recoverable Costs, and a little bit about Part 36.

I have not got a scooby-doo what the position is.

I repeat my thanks to Simon Gibbs – over to you Simon.

OPERA, CAPE TOWN OPERA AND LUCY MERVIK AND BECOMING AN OPERA SINGER

I am currently in the Western Cape of South Africa and enjoying many events with Cape Town Opera and I am delighted to be a gold sponsor and also involved with the UK Friends of Cape Town Opera.

I was over 40 before I had any involvement in opera and that involvement started with a young opera singer from Dorset, Lucy Mervik, who was seeking sponsorship and support.

So, thank you Lucy, and Cape Town Opera.

Here is a lovely piece that Lucy wrote a little while ago.

A CHRISTMAS CAROL BY THE HIGH COURT

Not a good week for employment tribunals with the Government proposing to re-introduce fees for claims.

Below I reproduce my piece from 18 December 2014 on the previous scheme-  A Christmas Carol by the High Court – which scheme was outrageously upheld by the High Court and Court of Appeal, but torn to shreds by the Supreme Court.

Why not just deport Employment Tribunal Applicants to Rwanda?

The new scheme will last until around 10am on the day after the new Government is elected.

Here is my blog about the last Employment Tribunal Fee scheme – read by the Supreme Court I understand.

A CHRISTMAS CAROL BY THE HIGH COURT

Given the Supreme Court decision this morning unanimously to allow the appeal against the Administrative Court’s refusal to judicially review Employment Tribunal fees, this post I wrote at the time needs another airing.

Scene: 

Any solicitor’s office in the country (except the Strand).

Solicitor:

So, Ms Peasant you have been sacked because you are pregnant and you have come in for a free interview.  Typical of your sort if I may say so.

Client: 

It’s so unfair.  I want to bring a claim.  You do no win no fee don’t you?

Solicitor: 

WE do. The State doesn’t.  Tribunal fees are £1,200.00 win or lose.

Client: 

I haven’t got that sort of money!  I am unemployed.  I’ve been sacked.

Solicitor: 

Come, come now.  I am an employment lawyer.  I know the minimum wage is £6.50 an hour.  Easy to remember; it is one hundredth of what I charge – 200 hours work and you have the fee, unless we need to appeal.  Cut out the foreign holidays. Sack the nanny – she won’t be able to afford the fee to sue you.  My little joke!

Client:  

My Mum looks after the children.  We only just got by when I was working.

Solicitor: 

There I can help you.  You need to prioritise your spending.  The High Court has said so.  Eat your existing children – Swift said that and he was a clever man, but you peasants don’t read you just watch Sky.

Client: 

We don’t have Sky.  Murdoch is nearly as right wing as the High Court.

Solicitor: 

Go down the library and read Swift.

Client: 

They’ve closed the library.

Solicitor:  

Have an abortion.  Save you money and I might be able to get your job back.

Client: 

I don’t want an abortion.  Anyway they’ve closed the clinic.

Solicitor:

Find a rich man.

Client: 

I am married.  My husband was sacked for complaining about my treatment at work.

Solicitor: 

Oh then he has a claim as well then.  Another £1,200.00 mind.

Client:  

I’ve had enough!

Solicitor: 

I advise on the law; I don’t make it.  I want to read to you what the High Court said:

“The question many potential claimants have to ask themselves is how to prioritise their spending; what priority should they give to paying fees in a possible legal claim as against many competing and pressing demands on their finances?”

It goes on a bit but basically do you want to bring a claim or eat and feed and clothe your children?

Client: 

But no-one should have to make that choice in Britain in 2014.

Solicitor:  

That’s where you are wrong.  The court said:

“The question is not whether it is difficult for someone to be able to pay – there must be many claimants in that position – it is whether it is virtually impossible and excessively difficult for them to do so”.

Client:  

That’s wicked.

Solicitor: 

That’s the High Court. Lord Justice Elias is paid £198,674.00 and Mr Justice Foskett £174,481.00 so they know all about having to count the pennies.

Client:

Surely Labour will change all this.

Solicitor: 

Nope.

Client:  

I think I will vote for the Fascists then.

Solicitor:

They tried that in Germany.    Didn’t do them much good. Nice rallies mind.

Client leaves.  Solicitor hums the Horst Wessel.  There is a muffled explosion.  The local court is in ruins.

CIVIL PROCEDURE RULES: VALUE OF CLAIM: CPR 16.3, PRACTICE DIRECTION 7A 3.5, FORM N1A: A COMPLETE MESS

Fixed Costs Zoominars

I am running three Fixed Costs Zoominars on the following dates:

– Tuesday, 16 January 2024: 4pm to 5pm

-Tuesday, 19 March 2024: 4pm to 5pm

-Tuesday, 14 May 2024: 4pm to 5pm

Recordings of the Zoominars will be sent whether or not you attend.

Cost £150 + VAT for all three with as many people as you want attending from your organisation.

Full course material – another £150.00 + VAT.

Course information link – https://kerryunderwood.co.uk/courses-and-seminars.html

Course booking form link – https://kerryunderwood.co.uk/zoominar-fixed-costs-choose-places.html

CPR 16.3(3) correctly states that in a claim for personal injuries, other than those arising from a Road Traffic Accident which occurred on or after 31 May 2021, a Claimant must state in the Claim Form whether the amount which they expect to recover as general damages for pain, suffering and loss of amenity is –

(a) not more than £1,500; or

(b) more than £1,500.

That of course reflects the fact that, outside the field of Road Traffic Accident matters, that is now the small claims limit in personal injury work.

Practice Direction 7A 3.5 has not been updated and reads:

“3.5  If a claim for damages for personal injuries is started in the County Court, the Claim Form must state whether or not the claimant expects to recover more than £1,000 in respect of pain, suffering and loss of amenity.”

Such failure to look at related Civil Procedure Rules and Practice Directions, and update them where necessary, is common.

Form N1A – Notes for Claimant on completing a Claim Form has not been updated either and still refers to having to say whether the damages for pain, suffering and loss of amenity are either:

• ‘not more than £1,000’ or
• ‘more than £1,000’.

CPR 16.3 provides that the Claimant must, in the Claim Form, state:

“(a) the amount of money which he is claiming;

(b) that he expects to recover—

                (i)not more than £5,000;

                (ii)more than £5,000 but not more than £15,000; or

                (iii)more than £15,000; or

(c) that he cannot say how much he expects to recover.”

The requirements in CPR 16.3(3) already referred to is in addition to the requirements of CPR 16.3(1) and (2) in relation to a personal injury claim.

CPR 16.3(A) deals with personal injury claims arising from a road traffic accident where the small claims limit is £5,000.

Here is the relevant Section of Form EX50 – Guidance – Civil Court Fees – updated 6 October 2023.

Civil court fees (EX50) – GOV.UK (www.gov.uk)

Here is the overview:

This guide sets out a selection of civil court fees. See the full list of fees charged in the civil and family courts (EX50A).

The full lists of all court fees are contained in statutory instruments (SIs) known as fees orders and can be found at www.legislation.gov.uk

The court fees set out on this page apply to, and are the same in, the High Court and in county courts and family courts, unless otherwise stated. Your local court will be able to help you identify any fee not covered here.

Find out how to pay a civil or family court fee, get help with fees or get a refund.

Issuing claims

Money claims (civil fees order 1.1 to 1.2)

To issue a claim for money, the fees are based on the amount you are claiming, plus interest.

Value of your claim	Fee
Up to £300	£35
More than £300 but no more than £500	£50
More than £500 but no more than £1,000	£70
More than £1,000 but no more than £1,500	£80
More than £1,500 but no more than £3,000	£115
More than £3,000 but no more than £5,000	£205
More than £5,000 but no more than £10,000	£455
More than £10,000 but no more than £200,000	5% of the value of the claim
More than £200,000	£10,000

The bands of valuing the claim do not reflect the different tracks, that is the Fast Track and the Intermediate Track.

The band that encompasses them simply reads:

“More than £10,000 but no more than £200,000”

In a potential Fixed Recoverable Costs scheme case, do you have to give a statement of value of between £25,000 and £100,000, or what?

What court fee do you then pay?

5% of £100,000, even if the true range is say £30,000 to £60,000?

Parliament has a committee which constantly looks for errors in Statutory Instruments and inconsistencies between different Acts of Parliament and Statutory Instruments etc.

Surely it is time the Civil Procedure Rule Committee had such a sub-committee.

In fact, it may be better to put that task out to an external body as regrettably, the Civil Procedure Rules Committee inspires confidence in almost no one.

FIXED COSTS EXTENSION: PROPOSED RULE AMENDMENTS

Fixed Costs Zoominars

I am running three Fixed Costs Zoominars on the following dates:

– Tuesday, 16 January 2024: 4pm to 5pm

-Tuesday, 19 March 2024: 4pm to 5pm

-Tuesday, 14 May 2024: 4pm to 5pm

Recordings of the Zoominars will be sent whether or not you attend.

Cost £150.00 + VAT for all three with as many people as you want attending from your organisation.

Full course material – another £150.00 + VAT.

Course information link – https://kerryunderwood.co.uk/courses-and-seminars.html

Course booking form link – https://kerryunderwood.co.uk/zoominar-fixed-costs-choose-places.html

In Issue 201 in my piece – FURTHER FIXED RECOVERABLE COSTS CHANGES – at Pages 1595 to 1599, I set out the minutes of the Civil Procedure Rules Committee in relation to the Extension of Fixed Recoverable Costs, arising from their meeting of 3 November 2023.

Here, I analyse those proposed changes in more detail.

CPR 26.7(1)(a) is to be amended to replace the word “when” with the word “after” so that the new rule will read:

“CPR 26.7. (1) Subject to rule 26.8, the court shall allocate the claim to a track and, where applicable, assign it to a complexity band –

(a) after all parties have filed their directions questionnaire; (my bold).

The intention is to enable the court to allocate the claim to a track and, where applicable, assign it to a Complexity Band on the same occasion, but in a particular order.

CPR 26.9(10)(a) and (f) are to be amended and deal with track allocation in Clinical Negligence cases and a new definition regarding claims against Police authorities respectively; the final wording has not yet been published.

CPR 28.2(1) is subject to further revision, but that first revision does not reflect the usual practice that in Fast Track cases, Directions are given at the same time as allocation.

It was agreed that the mandatory obligation is to give directions but that the rule could be further revised to separate out Fast Track and Intermediate Track cases.

It is to be made discretionary to fix a Case Management Conference, and this is to be achieved by the word “may” replacing the word “shall” in CPR 28.12.

A clarificatory amendment concerning expert reports was proposed by expanding rule 28.14(c) with a new (c)(i) and (ii) which are designed to set out what is and is not included within the 20-page limit.

New (c)(i) will provide that the expert’s description of the issues on which they are instructed to give their opinion, the conclusions they have reached and the reasons for those conclusions, are included within the 20 page limit; but new (ii) will expressly provide that the expert’s CV and any supporting materials to which the reasons for their conclusions refer, are added to the existing list of items (comprising any necessary photographs, plans and academic or technical articles attached to the report) are excluded.

Disclosure

The current practice is to only have Case Management Conferences in Fast Track cases by exception and the view was that that rule should remain.

New CPR 31.5 arises “more acutely” now that there are three applicable tracks, and because it now applies to the Fast Track, which was not previously the case.

Consequently, the disclosure provision under sub-rule (1) would be deleted and sub-rule (2) will be redrafted so that it is limited to the Intermediate Track and the Multi Track.

Sub-rule (3) will be amended to add the words “if any” before the words “party must file and serve a report”.

Thus, the new rule will read:

(3) not less than 14 days before the first Case Management Conference, if any, each party must file and serve a report verified by a Statement of Truth, … (my bold)

Contracting Out

CPR 45.1(3)(b) is effectively scrapped as it will be amended to include an exception to the ban on Contracting Out if

“the paying party and the receiving party have each expressly agreed that this Part shall not apply”.

The Civil Procedure Rules Committee states that the intention is to make it clear that when a contract allows for it the Civil Procedure Rules in this area can be disapplied, and that this has been incorporated in light of the decision of the Court of Appeal in

Doyle v M & D Foundations & Building Services Ltd [2022] EWCA Civ 927 (8 July 2022).

The logic of this does not stack up as the Judgment was delivered well over a year before the new Civil Procedure Rules banning  Contracting Out came in.

It appears that the rules were drafted without anyone realizing or being aware of that Court of Appeal decision, which attracted a lot of publicity amongst lawyers.

Inquest Costs

CPR 45.1(9) is to have added to it:

“This Part does not apply to costs incurred in respect of, or in connection with, inquest proceedings”.

Restoration Proceedings

A new CPR 45.15A allows for the costs of Restoration Proceedings and will be included in the Costs Tables in the rules.

Consequently, CPR 45.56 dealing with the recoverability of Costs Restoration Proceedings in Noise Induced Hearing Loss claims will be omitted, as unnecessary when the new rule is in the Tables.

Advocate’s fees on late settlement or vacation

In the Fast Track, 100% of the Advocacy fees will be recoverable if the case settles the day before trial or on the day of the trial.

If it settles two days before trial, then 75% of the fee will be recoverable.

Before that, nothing is recoverable.

In the Intermediate Track, the 100% rule will apply in the same way, that is if the case settles on the day before trial or on the day of the trial.

However, in the Intermediate Track, 75% of the fee will be recoverable if the case settles five, four, three or two days before trial.

If settled more than 5 days before trial, then nothing is recoverable.

The Tables will be amended accordingly.

INTERMEDIATE TRACK BANDING: ANOTHER DRAFTING ERROR

Fixed Costs Zoominars

I am running three Fixed Costs Zoominars on the following dates:

– Tuesday, 16 January 2024: 4pm to 5pm

-Tuesday, 19 March 2024: 4pm to 5pm

-Tuesday, 14 May 2024: 4pm to 5pm

Recordings of the Zoominars will be sent whether or not you attend.

Cost £150 + VAT for all three with as many people as you want attending from your organisation.

Full course material – another £150.00 + VAT.

Course information link – https://kerryunderwood.co.uk/courses-and-seminars.html

Course booking form link – https://kerryunderwood.co.uk/zoominar-fixed-costs-choose-places.html

Into which Complexity Band does an Intermediate Track claim go where only one issue, liability, is in dispute, but the trial will last two days?

Assignment within the Intermediate Track is dealt with by CPR 26.16 which has within it Table 2 and the minimalist list of factors governing  Complexity Band assignment.

The fact that the trial will last longer than one day takes it out of Complexity Band 1, as that is factor (b) in Complexity Band 1.

Clearly, the matter could go into Complexity Band 4 as that has no restrictions save that the matter  be unsuitable for assignment to Complexity Bands 1 to 3.

The matter is unsuitable for assignment to Complexity Band 1 as it will last longer than one day.

Clearly it ought to go into Complexity Band 2 or 3, where a two-day trial can be accommodated, but they state that they are restricted to claims where more than one issue is in dispute.

That is obvious madness, but that is indeed what it states.

The High Court recently said the Civil Procedure Rules are not the law of the country, but rather a commentary on them, and we can agree that as commentaries go, they are virtually unintelligible at times.

My view is that a court could take a purposive approach, as they did in the Qader & Esure case and add in words after the first word “any” along the following lines:

 Any “Claim where only one issue is in dispute but which is expected to last more than one day; and”

I am grateful to Simon Gibbs, author of the excellent blog for pointing this further drafting error out to me.

COURT OF APPEAL ALLOWS FORCED ADR AS CIVIL CLAIMS IN FREEFALL

Courts Can Force Parties Into Alternative Dispute Resolution: Halsey Decision Obiter Says Court Of Appeal In Obiter Decision

In

Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416 (29 November 2023)

the Court of Appeal, in a decision that has been subject to savage criticism, held that the courts can force parties to engage to Alternative Dispute Resolution by staying the action, and thus, effectively ending the proceedings unless and until non-court based processes are followed.

Here, the Court of Appeal declined to stay the action to force the claimant to use the defendant council’s internal complaints procedure, stating that it “may not be the most appropriate process for an entrenched dispute of this kind”.

The case involved a claim in nuisance relating to Japanese knotweed, allegedly spreading from the council’s land onto the claimant’s private property.

The council argued that the claimant should have followed Alternative Dispute Resolution options, including the council’s own internal complaints procedure, before bringing court proceedings.

The lower court dismissed the council’s application but gave permission to appeal to the Court of Appeal.

The Court of Appeal held that the lower court was not bound by the Court of Appeal decision in

Halsey v Milton Keynes General NHS Trust [2004].

The Deputy District Judge had referred to that case and stated that he was bound to follow the statement in that case that

“to oblige truly unwilling parties to refer their disputes to mediation would be to impose an unacceptable obstruction on their right of access to the court”.

The Court of Appeal said that the relevant paragraphs in the Halsey case were not part of the essential reasoning of the case and did not bind the judge to dismiss the council’s application for the stay, in other words they were obiter.

One can imagine the reaction of the Court of Appeal to a Deputy District Judge taking that view and stating:

“I am ignoring the Court of Appeal decision as the relevant part was not part of its essential reason”.

Ironically, given that the Court of Appeal did not impose a stay in this matter, their comments are also obiter and not binding on other courts.

Here the Court of Appeal had this to say:

“The court can lawfully stay proceedings for, or order, the parties to engage in a non-court-based dispute resolution process provided that the order made does not impair the very essence of the claimant’s right to proceed to a judicial hearing and is proportionate to achieving the legitimate aim of settling the dispute fairly, quickly and at reasonable cost.”

Relevant factors include the form of Alternative Dispute Resolution being proposed and whether the parties were legally represented or advised, and whether the nature of the process contemplated would be relevant.

COMMENT

A poor decision which should be overturned by the Supreme Court or Parliament.

No one should be forced out of the court process. The court has the remedy in costs to punish  parties who unreasonably refuse to mediate or engage in Alternative Dispute Resolution.

The ludicrous suggestion, rejected by the Court of Appeal, that a council should be able to force a claimant bringing an action against it to use its own complaints procedure, and thus, be judge and jury in its own case, is a very dangerous concept.

Very many court actions are against the state or emanations of the state and any restriction on the power of the citizen to challenge the power of the state should be utterly rejected in the strongest terms by all courts at all levels.

The concern is that as the Civil Justice System falls apart, or has fallen apart, the pressure will be on citizens to do anything other than use the courts.

There has been a massive slump in the number of proceedings issued generally, and the Small Claims Portal notoriously has a backlog of 385,000 cases.

Land Registry applications take two years.

Small claims take 55 weeks until the first hearing.

The Probate Registry is under investigation by the House of Commons Justice Committee for its delays.

The courts should look to heal themselves before forcing people into non-court processes.

Supreme Court Workload Slumps

The number of Supreme Court judgments delivered in 2022-23 was a third lower than the previous year, the court’s annual report has revealed.

A total of 38 rulings is the lowest number since 2018-2019.

In 2021-22 the court delivered 56. 

Meanwhile the Judicial Committee of the Privy Council almost doubled its delivered judgments during the same period, to 60 compared with 34 the year before.

Seven UK Supreme Court and four Judicial Committee of the Privy Council judgments were not unanimous. 

In 2022-23, the UK’s highest court decided 273 permission to appeal applications with 70 applications granted permission. 

Of the permission to appeal applications filed with the Supreme Court, 24 were considered public law and human rights cases.

They outnumbered all other topics, including commercial – 17, and family – 15.

Financial statements reveal the UK Supreme Court and four Judicial Committee of the Privy Council total expenditure in 2022-23 was £13,116,000, £722,000 less than the previous year. This included £7,408,000 in staff costs.

Operating income, which includes court fees and contributions from UK court services, totalled £8,087,000.

Research published by Thomson Reuters last month showed that the UK Supreme Court has come to deal almost exclusively with civil cases.  

The number of cases filed increased 23% last year to 226, with civil cases accounting for 98%, up from 76% – 168 out of 220, in 2013-14.

Just 2% of cases filed were criminal cases last year, versus 24% 10 years ago.

385,000 Backlog On Personal Injury Small Claims Portal: House Of Commons To Investigate

The Ministry of Justice is investigating why thousands of claims appear to have stalled in the whiplash portal. 

Around 385,000 claims that were started on the Official Injury Claim system since its launch remained ‘unresolved’ at the end of September, according to the department.

In its response to the justice committee’s concerns about the backlog, the Government agreed that timely progression of cases is something officials are ‘investigating in detail’.

The response added:

“Whilst the majority of claims proceed through OIC towards settlement, there are an increasing number of claims sitting on the system where no positive action to move them forward has been taken for some time and could, therefore, be considered as dormant.”

The committee reported in September that only a quarter of cases had reached settlement, despite the portal being active since May 2021.

The average time taken to settle a claim is 251 days. This was predicted to increase further as more complex cases came through the system.

The Government response stated that this average has indeed risen to 270 days, and for represented claimants it is higher still, at 327 days.

The Ministry of Justice said that the tranche of stalled claims includes those which have received a denial of liability and which the claimant has chosen not to pursue any further.

Many were also halted pending the result of the Rabot case on mixed injury claims, which is due to be heard in the Supreme Court in February 2024.

The response added:

“MoJ agrees that more work needs to be undertaken to better understand the flow of claims through the OIC process. Additional data will be published from January 2024 to help to provide greater clarity on the impact of dormant claims on outstanding claim volumes.”

The committee’s report also recommended that the Government establish how exactly the estimated £1.2bn savings from the reforms have been passed onto motorists by insurers.

The Civil Liability Act, which formed the basis for the reforms, requires the Treasury to report by April 2025 on the savings achieved.

The Government’s response indicated that this work has already begun, but there are no commitments about bringing forward deadlines for publishing this research.

Legal Services Board Proposes 14% Rise in Its Annual Budget

The Legal Services Board, which is the overall regulator for all legal services. proposes that its budget for the year be increased by 14%.

This will see it rise by £650,000 to £5.33 million a year.

This Board is funded entirely by regulated members of the legal profession, totalling 191,162 authorized individuals.

An eight-week consultation on the budget increase will begin in January 2024 ahead of a final business plan and budget being presented for approval in March 2024.

Justice Committee Of House Of Commons To Examine Probate Delays

The House of Commons Justice Committee is enquiring into delays in the probate system following the waiting time for grants of probate doubling between April 2022 and April 2023.

The Committee noted that lawyers are routinely advising clients to expect at least a nine-month delay, with delays often considerably longer than that.

The  Committee will hear evidence on capacity, resources and delays across the probate service and the impact of digitisation and centralisation, including the effectiveness of the online probate portal.

The work of the Probate Registry will be examined closely; the Justice Committee  wishes to hear from individuals as to their experience of applying for probate and how beneficiaries, executors and the bereaved are supported through the process, and how they are protected from rogue traders.

Written submissions must be made by 22 January 2024, with witnesses being called to give evidence after that.

Sir Bob Neill, chair of the committee, said:

“Concerns over probate have risen sharply over the last five years, with the waiting time for probate almost doubling in the last financial year alone. It is right the justice committee examine the reasons behind this, the consequences and takes evidence on the issues of capacity and resourcing.

Families across the country, have faced challenges in navigating the probate system, with reports of rogue traders and poor practice, as well as significant delays. My committee wants to examine how the administration of probate could be improved for people who are already coming to terms with the loss of a loved one.”

In October 2023, a Law Society commissioned survey showed that nearly two thirds of lawyers believed that online portals had increased delays in granting probate.

There was a widespread agreement that the process is taking longer than the paper-based system.

Ministry Of Justice Consultation On Implementing Increases To Selected Court And Tribunal Fees

On 10 November 2023, the Ministry of Justice published a consultation, which seeks views on proposals to deliver increases to selected court and tribunal fees:

Increasing 202 court and tribunal fees by 10%

These fee increases will be delivered in spring 2024, following the expansion of the Help with Fees remission scheme in late 2023.

The list of fees selected for increases can be found in Annex A of the consultation document.

Establishing routine updates to fees every two years

It proposes to make inflation-based increases to selected fees every two years and will review the costs underpinning fees to identify any fluctuations that require reflecting in the corresponding fee itself.

Where the Ministry of Justice becomes aware of reduced costs, fee updates in advance of each two-year interval will continue to be made, to prevent any non-enhanced fees over-recovering their cost.

It proposes to enhance, setting a fee above its cost, fee 4.1 under the Magistrates’ Court Fees Order 2008, which relates to proceedings under the relevant regulations regarding an application for a liability order.

The Ministry of Justice looks to retain the fee at 50p. A separate affirmative statutory instrument would be required, which the Ministry of Justice intends to introduce by the end of March 2024.

Responses should be submitted by 11.59 pm on 22 December 2023 via post to Fees Policy Team, Ministry of Justice, 102 Petty France, London, SW1H 9AJ or via email to mojfeespolicy@justice.gov.uk.

Source: Ministry of Justice: Implementing increases to selected court and tribunal fees (10 November 2023).

Civil Claims Issued

Civil claims issued in September 2023, the last month for which figures are available, showed a decrease of 11.9% as compared with March 2023.

Defended claims in September 2023 dropped to 10.1% as compared with March 2023.

Small Claims – 55 weeks to trial

In September 2023, the last month for which figures are available, the average time taken to the trial or first small claims hearing was 55.2 weeks, compared to 51.4 weeks in March 2023.

Thus, in six months the number of civil claims has dropped sharply but the delay in hearing even a small claim has increased sharply.

Source: His Majesty’s Courts And Tribunals Service Management Information Tables

TOWNS AND CITIES I HAVE SPOKEN IN

As the final leg of the final tour comes to an end, those long train journeys and evenings in hotels got me thinking about cities and towns where I have spoken.

I am sure I have forgotten some but here goes:

FIXED COSTS: LAST FEW COURSES!

CIVIL LITIGATION: MANCHESTER, LIVERPOOL, LEEDS, AND BIRMINGHAM

PERSONAL INJURY: MANCHESTER, LIVERPOOL, LEEDS, BIRMINGHAM AND NEWCASTLE

The two Manchester Courses are live-streamed and can be viewed remotely. Same price.

Please book and email claire.long@lawabroad.co.uk with your details if you want to attend Manchester remotely – we can then send you the link.

Details of the Courses including dates are here, and can be booked here.

The changes are enormous and in place now and are retrospective for Civil Litigation, affecting all retainers where the case has not been issued.

The Civil Procedure Rules are a mess. You need to attend.

INTRODUCTION TO FIXED RECOVERABLE COSTS

Kerry is currently undertaking a Nationwide Tour of courses.

Details  here and book here.

Another utterly brilliant course from Kerry

Kerry is very knowledgeable and gives very clear answers.

Great to have the benefit and wisdom of Kerry.

Very informative and helpful.

Very good. Will be back for more.

Amazing

The introduction of fixed recoverable costs in relation to nearly all civil litigation claims valued at £100,000 or less represents the biggest change for civil litigators since the implementation of the Woolf Report, and the consequent introduction of the Civil Procedure Rules over 20 years ago.

These reforms relate primarily to civil litigation, but much personal injury work is caught by them.

In relation to costs, it is arguably the most significant change since lawyers were first allowed to charge for court work, that is since the Attorneys and County Court Act 1235, which I wrote about in Issue 42 at pages 123-124 – ATTORNEYS AND COUNTY COURT ACT 1235.

So that is arguably the biggest change in costs for 788 years.

Background

In his 2016 book – The Reform of Civil Litigation – Lord Justice Jackson wrote

Kerry Underwood’s prediction. In 2006, Kerry Underwood published the second edition of his book Fixed Costs. Chapter 1 began with a bold statement: “Fixed costs represents an opportunity to rescue a civil justice system that, like most public services, is in terrible trouble.” Chapter 1 predicted that fixed costs would spread quickly from the RTA scheme to other areas of litigation.

What was the position in 2009, when the costs Review began? The position was essentially the same as described in Underwood’s book.

After some phone calls and emails with Lord Justice Jackson I became heavily involved in this Review, resulting in the publication on 31 July 2017 of Lord Justice Jackson’s Supplemental Report

Review of Civil Litigation Costs: Supplemental Report Fixed Recoverable Costs

On 28 March 2019, the Ministry of Justice published its consultation paper:

Extending Fixed Recoverable Costs in Civil Cases: Implementing Sir Rupert Jackson’s Proposals

That consultation paper contained the Government’s proposals for implementing the reforms and needs to be read in conjunction with the final document, published on 6 September 2021 by the Ministry of Justice:

Extending Fixed Recoverable Costs in Civil Cases: The Government Response

All Change

Throw away your time recording system; forget work in progress, forget cost budgeting, and forget assessment proceedings.

Embrace contingent and conditional fees and get to grips with Part 36.

These are the lessons to be learnt from the field of personal injury where fixed recoverable costs have been in for 20 years.

The key points are that recoverable fees are the same irrespective of the level of the fee earner, solicitor or counsel, and irrespective of whether, or when, liability has been admitted.

There will be capped costs if the matte settles pre-issue, and an entitlement to those costs without contractual agreement.

Thus, the moment you write that initial stroppy letter to the other side, you have created a potential adverse cost liability for your client.

This does not arise in personal injury cases, due to the system of Qualified One-Way Costs Shifting, which does not apply in other civil work at present but is likely to spread.

Match or beat your Part 36 offer and you get a straight 35% increase in fees. Even if you are lucky enough to have a profit margin of 35% this doubles your profit; if your profit margin is 17.5%, it trebles your profit on that work.

There is much more to it than this, fixed recoverable costs will be the biggest change in the working lives of most civil litigators.

• Guideline Hourly Rates – irrelevant

• Seniority of lawyer – irrelevant

• Time spent – irrelevant

• Indemnity principle – irrelevant and does not apply

• Budgeting – irrelevant and does not apply

The whole purpose of the new system, and the abolition of indemnity basis for assessment etc, was specifically stated in the Government’s response to avoid the need of detailed assessment

“and the keeping of records to inform an assessment.” (my bold)

The indemnity principle

In

Nizami v Butt [2006] EWHC 159 (QB)

the court held that the indemnity principle did not apply to fixed recoverable costs cases, meaning that whatever the solicitor and own client retainer contained, or did not contain, the paying party had to pay the fixed recoverable costs.

In his 2017 Report, Lord Justice Jackson said, at paragraph 2.8:

“I have previously argued that, in relation to costs, the common law ‘indemnity principle [as compared with indemnity costs] served no useful purpose and should be abolished: see chapter 5 of my Final Report. That argument fell on deaf ears. In those circumstances, the CPR must make it clear that the indemnity principle has no application to FRC.[fixed recoverable costs]”

This rule does not prevent a challenge by the client to her or his own solicitor’s bill under the Solicitors Act 1974.

Fixed Recoverable Costs were originally proposed as part of the Woolf Report, and it was that Report which brought in the Civil Procedure Rules to replace the old Rules of the Supreme Court and County Court Rules which appeared in the old White Book and Green Book.

Lord Woolf said that there was no point in bringing in the Civil Procedure Rules without at the same time introducing Fixed Recoverable Costs, but, surprise, surprise, that is exactly what happened.

With effect from 1 April 2013, Fixed Recoverable Costs were introduced for most personal injury cases valued at £25,000 or less, and this flowed from Lord Justice Jackson’s first Report – Review of Civil Litigation Costs: Final Report published in January 2010.

These current changes are heavily based on Lord Justice Jackson’s Supplemental Report:

Review of Civil Litigation Costs: Supplemental Report Fixed Recoverable Costs

which was published in July 2017.

The 1 October 2023 changes are achieved by the Civil Procedure (Amendment No. 3) Rules 2023, Statutory Instruments 2023 No.788 (L.8) which appears at Annexure A.

There is an Explanatory Memorandum to the Civil Procedure (Amendment No. 2) Rules 2023, Statutory Instruments 2023 No. 572 (L.6) and that appears at Annexure B.

The156^th  update – Practice Direction Amendments – supplement the changes to the Civil Procedure Rules in relation to Fixed Recoverable Costs and appears at Annexure C.

SCOPE

Virtually all civil litigation in England and Wales valued at £100,000 or less is subject to the new Fixed Recoverable Costs Scheme.

I set out below the exceptions, and all other claims allocated to the fast track or the intermediate track will be subject to the new scheme.

I deal with the allocation criteria in the section Tracks, Bands and Stages.

EXCEPTIONS

The main areas excluded are:

–              Judicial Review;

–              A Claim for damages in relation to harm, abuse or neglect of or by children or vulnerable adults,
including historical child sexual abuse

–              Mesothelioma and Asbestos-related lung disease claims

–              Military claims;

–              Clinical Negligence, except where breach of duty and causation admitted and where the claim
would have been allocated to the intermediate track

–              Actions against the Police involving an intentional or reckless tort, or relief or remedy under the
Human Rights Act 1998.

This exclusion does not apply to a road accident claim arising from negligent police driving, an
employer’s liability claim, or any claim for an accidental fall on police premises.

–              Intellectual Property – costs rules governing scale costs in the Intellectual Property and   
Enterprise Court will remain the same as they are present but will move from Section IV of       
Part 45 but will be move to Section VII of Part   46 – Costs Special Cases

–              Housing Disrepair – inclusion delayed until at least 2025.

–           A claim that the court could order to be tried by jury if satisfied there is in issue a matter set out in
section 66(3) of the County Courts Act 1984 or section 69(1) of the Senior Courts Act 1981.

–          Part 8 claims.

–          Solicitors Act 1974 claims.

The court has a general discrepancy who allocate complex claims with a value of under £100,000 to the multi-track, thus removing them from the Extended Fixed Recoverable Costs scheme.

There is no guidance on what will be cast as a complex case, and this is likely to lead to extensive satellite litigation.

It is of interest as to how the exceptions have been achieved.

New CPR 26(10) reads:

“(10)      A claim must be allocated to the multi-track where the claim is –

• A mesothelioma claim or asbestos lung disease claim;

• one which includes a claim for clinical negligence, unless both breach of duty and causation have been admitted;

• a claim for damages in relation to harm, abuse or neglect of or by children or vulnerable adults;

• a claim is one the court could order to be tried by jury if satisfied that there is in issue a matter set out in section 66(3) of the County Courts Act 1984 or section 69(1) of the Senior Courts Act 1981; or

• a claim against the police which includes a claim for—
  • an intentional or reckless tort; or
  • relief or a remedy in relation to a breach of the Human Rights Act 1998.”

Thus, as a matter of principle, those matters go into the Multi Track, and are unlikely to be in any extended scheme of Fixed Recoverable Costs as it is not a matter of value of the claim, but rather of principle.

However, in relation to some other exclusions, such as those relating to Military Claims, and Housing Disrepair and associated claims, the exclusion is not by this method.

My view is that such claims will be brought within the Fixed Costs regime, or a tailor-made bespoke scheme for such claims, sooner rather than later, especially as in Military Claims the defendant and potential paying party is the state, and in Housing Disrepair often a Local Authority.

In relation to Housing Disrepair and associated claims, they have been specifically excluded for a period of two years, but with a view to them being brought in at some stage.

Housing claims are excluded from both the fast-track Fixed Costs regime and the intermediate track Fixed Costs regime and that is by virtue of new CPR 45.1(4) which reads:

(4)          Section VI and Section VII of this Part do not apply to a claim or    counterclaim which relates,         
in whole or in part, to a residential property or dwelling and which, in respect of that property,
includes a claim or counterclaim for—

                                (a) possession;

                                (b) disrepair; or

                                (c) unlawful eviction,

              save where the claim or counterclaim in respect of the residential property or dwelling arises        
from a boundary dispute.

It will be seen that housing claims are defined as including any claim or counterclaim which relates, in whole or in part, to a residential property or dwelling, in which in respect of that property, includes a claim or counterclaim for:

(a)          possession;

(b)          disrepair; or

(c)           unlawful eviction;

save where the claim or counterclaim arises from a boundary dispute.

Although these matters are excluded from both the fast track and intermediate track Fixed Costs scheme, the Government has announced that their inclusion has been delayed for a period of two years, as it was originally intended to bring them in.

It should be noted that it is only the new Rules on Fixed Costs which do not apply to these claims, and the remainder of the new Rules, including those relating to allocation do apply.

The provisions of Part 2 of CPR 45 still apply, and they provide for Fixed Costs for, among other things, undefended possession claims and accelerated possession claims – see new CPR 45.16(2)(c) to (f).

Note that it is only residential property matters which are excluded from the new Fixed Costs regime, and therefore, all matters relating to commercial property are within the new Fixed Costs scheme if proceedings are issued on or after 1 October 2023.

Note also that by virtue of new CPR 45.1(5) where a claim relates in part to a residential property or dwelling, and that part of the claim is concluded or discontinued, the exclusion from the Fixed Costs regime in both the fast track and the intermediate track shall continue to apply to the remainder of the claim.

IMPLEMENTATION DATE

Sunday, 1 October 2023.

Any case, whether civil or personal injury, issued by 30 September 2023 can never be subject to the new Fixed Recoverable Costs scheme, either in relation to costs or procedures.

THE COURT’S POWERS TO DISAPPLY FIXED RECOVERABLE COSTS

Once a claim is allocated to the fast track or intermediate track, the court’s power to award costs is limited by CPR 28.8 to awarding fixed costs in accordance with Practice Direction 45, so once a claim has been allocated and assigned, the court does not have discretion to remove a case from the Fixed Recoverable Costs regime unless it re-allocates it.

The court retains discretion to decide the incidence of costs in CPR 45.1(2)(a), when they are paid, CPR 45.1(2)(b) and whether to order that one party pays some or all the other party’s costs, CPR 45.1(2)(c).

The court cannot order an increase or reduction to the Fixed Recoverable Costs figures other than as provided for in the rules, CPR 45.1(3).

Despite these rules, CPR 45.9 states that the court may consider a claim for costs exceeding the Fixed Recoverable Costs where there are exceptional circumstances making it appropriate to do so.

There is no guidance as to what might constitute exceptional circumstances, so this will likely be the subject of case law once the new rules come into force.

If a party does seek costs in excess of the Fixed Recoverable Costs but fails to achieve an order for more than 20% of the Fixed Recoverable Costs, they will only receive the lower of the Fixed Recoverable Costs or the assessed costs and may not be able to recover their costs of assessment, CPR 45.11.

TRIGGER DATES

PERSONAL INJURY

Date of cause of action, and in disease claims, the date of the letter of claim.

Consequently, existing personal injury actions, and those where the accident occurs on or before Saturday, 30 September 2023 are unaffected, and can be proceeded with as before.

This gives personal injury lawyers, who are very well acquainted with Fixed Recoverable Costs, extra time to plan and work out a policy moving forward in relation to accidents occurring from 1 October 2023 onwards.

Virtually all personal injury actions, except for the exceptions listed above, are already covered if the damages are £25,000 or less, and although there are changes to the Fast Track for personal injury matters, personal injury lawyers will take these in their stride.

The key development for personal injury lawyers is the fact that claims valued at £25,000 to £100,000 will now be subject to Fixed Recoverable Costs, and will be in the new Intermediate Track, with its new rules and concepts.

Another introduction across the board, for both personal injury work and civil litigation, is the Bands of Complexity.

OTHER CIVIL LITIGATION

This is very different, and in all fields except personal injury, dealt with above, the trigger date is the date of the issue of proceedings.

All cases issued on or after 1 October 2023 are subject to Fixed Recoverable Costs.

Thus, general civil litigators, unused to Fixed Recoverable Costs, must deal with issues now.

In relation to civil litigation, but not personal injury work, the changes are effectively retrospective in that in relation to matters unissued by 1 October 2023 the new Regime will apply, even if the case came into the office say five years ago.

The main problem area in terms of costs is likely to be the solicitor and own client retainer and the agreement in relation to counsel’s fees.

In a case that has been proceeding for some time, but has not been issued, it may well be the case that the costs are already above the level of Fixed Recoverable Costs, even if the matter went to trial.

The solicitor and client may have entered into an hourly rate retainer on the basis that at least Guideline Hourly Rates would be recovered from the other side on success, subject to reasonableness and proportionality.

All that goes out of the window with Fixed Recoverable Costs which are determined by a combination of the stage reached and the value of the claim, or the amount of damages awarded by the court, or the amount of the settlement sum.

Time spent and the seniority of the lawyer are irrelevant and thus the costs will be recovered from the other side on a fundamentally different basis than that which solicitor and the client assumed to be the case when they entered into the retainer.

The same point applies in relation to counsel’s fees.

I deal below with the issue of solicitor and own client costs, and theoretically nothing changes, but in practice, everything changes.

In relation to civil litigation solicitors should look at the retainer in every single case which will be caught by the new Regime, and should meet the client, either live or virtually, to explain the changes, and, if necessary, to revisit the retainer.

Note carefully that all fast-track matters and intermediate-track matters will be in the County Court and thus the all-important provisions of Section 74(3) of the Solicitors Act 1974 apply.

There is no new law here, and any matter which will now be caught by the Fixed Costs Regime, and thus is in the fast-track or the new intermediate track, was always likely to be a County Court matter, and that would have been apparent when the solicitors were first instructed.

Any matter which was likely to be a High Court matter, and in the multi-track, is still likely to be allocated to the multi-track, and, whatever the value of the claim, Fixed Recoverable Costs have no place whatsoever in the multi-track.

The key difference is that when the solicitor and client entered into the retainer, the expectation would have been that the amount which could have been allowed in respect of each item as between party and party in the proceedings would be Guideline Hourly Rates, with reference to the hours spent, the seniority of the lawyer, and the location.

Thus, on defeat, a solicitor could charge the client the amount which could have been recovered from the other side on victory.

That changes overnight.

That sum will now be the Fixed Recoverable Costs sum, as that is the sum “which could have been allowed in respect of that item as between party and party in those proceedings”.

I deal with this below, but put simply if, when the retainer was entered into, the client did not specifically sign an agreement that the solicitor could charge more than the sum that could have been recovered, then that is that.

Further Areas of Uncertainty

Can that Agreement be Backdated?

On the face of it, the answer is yes in that the general law of contract is that parties can backdate an agreement and can have retrospective agreements.

This issue has arisen on many occasions in relation to Conditional Fee Agreements, and the courts have upheld the validity of retrospective Conditional Fee Agreements between solicitors and clients.

Thus, as a matter of pure law, the solicitor and client could enter into a new, retrospective retainer allowing the solicitor to avoid Section 74(3).

The problem will be one of informed consent; why would a client, fully informed of the issue, consent to a new, retrospective retainer, which would potentially cost them tens of thousands of pounds.

Can The Solicitor Terminate the Retainer If the Client Does Not Agree to The Variation?

My view is that the solicitor cannot lawfully terminate the retainer simply because Parliament has changed the law to mean that they will now recover from the other side less in costs than previously.

Had the Section 74(3) formalities been complied with at the outset, then the issue would not arise.

It is important to note that Lord Justice Jackson’s Supplemental Report:

Review of Civil Litigation Costs: Supplemental Report: Fixed Recoverable Costs

was published in July 2017.

Entirely by chance, that is just over six years ago, and the primary limitation period in general civil litigation is 6 years.

I know that that is not the whole story, as there are exceptions, but the general position is that any matter which arose by July 2017 will have been issued before 1 October 2023, due to limitation.

Consequently, a client on a Solicitors Act 1974 assessment will be able to argue that the solicitor was well aware that the Scheme of Fixed Recoverable Costs would be coming in for all claims valued at £100,000 or less and therefore should have insisted on the client opting out of Section 74(3) at that time.

Lord Justice Jackson’s Report contains specific figures, and uprated for inflation those are very much the figures effective 1 October 2023, and therefore the solicitors should have known at that stage the level of Fixed Recoverable Costs.

Does The Change Frustrate the Solicitor and Own Client Contract?

Essentially for the reasons given immediately above, my view is that it does not frustrate the contract, as the contract is still capable of being performed and the difference is that the client will recover different costs for the same case than previously thought.

The key issue will be that the shortfall between the recovered costs and the solicitor and own client costs will be significantly higher.

The contract is not frustrated, but rather the solicitor has made a bad bargain, and one that could have been avoided at the time by following the provisions of Section 74(3) of the Solicitors Act 1974.

Template Letter under Section 74(3)

KEY CLIENT ISSUES

A completely new costs explanation must now be given to the client and this cuts both ways:

• Costs recovery on winning is fixed;
• Costs exposure on losing is fixed;

A party discontinuing before issue will become liable to the un-sued party for fixed pre-action costs, so no more writing the letter before action from hell, at no costs risks.

After the event insurance should be much easier to obtain, as costs exposure will be lower, and certain, both of which insurers like.

SOLICITOR AND OWN-CLIENT COSTS

In law, nothing changes; in practice, everything will.

In a case where the client recovers Fixed Recoverable Costs, at say £50,000, the client is unlikely to be happy with a bill for the solicitor and unrecovered costs of, say, £60,000.

Costs Policies by Firms

Law firms need to consider now what their charging policy will be, and this may be different in different types of work and for different types of clients, but consistency is important, and it is vital that all of those dealing with costs explanations to clients, and solicitor and own client retainers, understand fully the various stages in the new scheme, the Recoverable Costs for each stage, and the concept of the complexity bands.

I set all of these out below, and a key variable at present, until matters settle down, is which band any particular matter will go into.

Possible options are:

• Carry on as before, hourly rate win or lose;

• Total charge to client capped at Fixed Recoverable Costs plus a stated percentage, e.g. 50%:

• Actual charge made to client, over and above Fixed Recoverable Costs, capped by reference to damages;

• A fixed fee plus a percentage of damages;

• A fixed fee for each stage;

• Virtually anything else that you want to think of.

The purpose of this Zoominar, and indeed, the Courses, is not to go through the law in detail on Conditional Fee Agreements, Contingency Fee Agreements and Damages-Based Agreements but care does need to be taken to avoid any solicitor and own client retainer being unenforceable as being in breach of the various  regulations.

I do publish and sell an extensive list of funding documents, and an un-hyperlinked Documents, Videos,  Agreements and Advices Menu is here .

Please contact me for further details.

COSTS BUDGETING

Simply not applicable in any Fixed Recoverable Costs cases.

CONTRACTING OUT

See next session.

COUNSEL’S FEES

Counsel’s fees are now fixed, and are recoverable, on top of the solicitors Fixed Recoverable Costs, for advices and opinions etc., as well as for advocacy.

Full details are in the tables below.

DETAILED ASSESSMENT

Very rare in any Fixed Recoverable Costs case. Where necessary, there is now a shortened form of detailed assessment.

EFFECT OF EXISTING CASE LAW

No doubt, the courts will draw extensively on the existing case law in relation to Fixed Recoverable Costs that has developed in the 10 years since they were introduced on 1 April 2013.

A detailed examination of the existing case law is beyond the scope of tonight’s Zoominar but will be dealt with subsequently in this Newsletter and in the Courses.

ESCAPING FIXED RECOVERABLE COSTS

Almost impossible.

EXPERTS’ FEES

These are not fixed and remain one of the major problems in relation to the costs of civil litigation.

GUIDELINE HOURLY RATES

Irrelevant and of no application.

INDEMNITY PRINCIPLE

Not applicable to Fixed Recoverable Costs cases – see Nizami v Butt.

SENIORITY OF LAWYER

Irrelevant – 20-year KC gets the same as a first day pupil and a 40 year qualified solicitor the same as a paralegal school leaver.

TIME SPENT

Irrelevant

WORK DONE

Irrelevant.

CIVIL PROCEDURE RULES MOST AFFECTED

Part 26 – Case Management.

Part 28 – Fast Track and the Intermediate Track.

Part 36 – Offers to Settle.

Part 45 – Fixed Costs.

Below are links to the new draft rules in each case.

Here is a summary, from the government’s own Explanatory Note, of the revisions.

“Part 26 (Case Management – Preliminary Stage)

7.7          Part 26 has been revised to provide for matters relevant to the allocation and assignment of          cases to the fast track and the new intermediate track, which has been reinstated following the 2021 Ministry of Justice consultation response.

                The normal bands for different types of case are set out in the Rules (at rule 26.15 for the fast        track, and at rule 26.16 for the new intermediate track). The complexity band to which a claim is assigned determines the level of Fixed Recoverable Costs allowed under Part 45 and Practice Direction 45.

                In summary, Part 26:

• provides for the new intermediate track, including its scope and the matters the court shall have regard to when deciding whether to allocate a claim to that track;

• provides for claims allocated to either the fast track or the intermediate track, to be assigned to one of four complexity bands and the matters the court shall have regard to when deciding the complexity band to which a claim should be assigned; and

• specifies those claims which must be allocated to the multi-track, so will not be subject to fixed costs.

Part 28 (The Fast Track and the Intermediate Track)

7.10       Part 28 as amended makes provision about the management of cases allocated to the fast and intermediate tracks, including provision regarding Noise Induced Hearing Loss claims allocated to the fast track. As far as possible, the amendments provide a consistent approach to case management in the fast track and intermediate track, while making separate provision for each track as necessary.

7.11       Practice Direction 28 has also been amended by way of substitution to support the             extension of Fixed Recoverable Costs.

Part 36 (Offers to Settle)

7.12       The Rules update the arrangements regarding Part 36 offers to settle in low value personal injury cases, which are already subject to Fixed Recoverable Costs, to cover those claims in the fast and intermediate tracks to which Fixed Recoverable Costs will now apply.

7.13       In respect of those claims, where judgment against the defendant is at least as advantageous to the claimant as the claimant’s Part 36 offer, rule 36.24 provides that costs will not be awarded, as is currently the case, on the indemnity basis under rule 36.17(4), but will be a percentage (35%) of the costs specified and calculated in accordance with rule 36.24(5).

Part 45 (Fixed Costs)

7.14       The Rules which implement the extension of Fixed Recoverable Costs in civil cases are primarily      those in Part 45, for which a new Part is substituted. There is a new Practice Direction 45, which              contains the tables of Fixed Recoverable Costs applicable to the relevant Section in Part 45.

7.15       A summary of the structure of the new Part 45 is as follows:

• Section I identifies the categories of case to which the Part as a whole applies and includes further provisions applying generally to Sections IV, VI, VII and VIII.

• Section II is concerned with Fixed Recoverable Costs on commencement of proceedings, entry of judgment and enforcement. Subject to minor amendments, the rules in this Section replicate those previously to be found in Section I of Part 45 and the tables of costs previously in that Section will, now, be in Practice Direction 45.

• Section III is concerned with Fixed Recoverable Cost in County Court debt recovery claims by HMRC. Again, subject to some minor amendments, the rules in this section are similar to those previously to be found in Section II of Part 45. Again, the tables of costs previously in that Section will now be in Practice Direction 45.

• Section IV is concerned with Fixed Recoverable Cost in claims proceeding through the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents (the RTA Protocol) and the Pre-action Protocol for Low Value Personal Injury Claims (Employers’ Liability and Public Liability) Claims (EL/PL Protocol). These provisions were previously to be found in Section III of Part 45. The tables of costs previously in that section will now be in Practice Direction 45.

• Section V is concerned with Fixed Recoverable Cost in those claims where there has been a failure to comply with or continue under the Pre-Action Protocol for Personal Injury Claims Below the Small Claims Limit in Road Traffic Accidents or the Pre-Action Protocol for Low Value Personal Injury (Employers Liability and Public Liability) Claims. These provisions were previously to be found in Section IIIB of Part 45.

• Section VI is concerned with Fixed Recoverable Costs in all fast-track cases.

• Section VII is concerned with Fixed Recoverable Costs in intermediate track cases.

• Section VIII is concerned with Fixed Recoverable Costs in Noise Induced Hearing Loss cases allocated to the fast track.

• Section IX is concerned with disbursements in claims to which Sections IV, VI, VII and VIII of Part 45 apply.”

FIXED RECOVERABLE COSTS: FOUR SHORT VIDEOS

Fixed Recoverable Costs Extension: Autumn Course Details

Details of the courses are here, and can be booked here.

Below are links to four short – all under ten minutes each – videos recorded for Practical Law UK and for TR Legal Europe, who have kindly allowed them to be distributed free, that is not behind a paywall, to be viewed until 12 noon next Monday, 9 October 2023. 

• Extension of fixed recoverable costs: key trigger dates

– https://uk.practicallaw.thomsonreuters.com/w-040-7702

• Extension of fixed recoverable costs: solicitor and own client costs

 – https://uk.practicallaw.thomsonreuters.com/w-040-7756

• Extension of fixed recoverable costs: contracting out

– https://uk.practicallaw.thomsonreuters.com/w-040-7767

• Extension of fixed recoverable costs: counsel’s fees

– https://uk.practicallaw.thomsonreuters.com/w-040-7746

Transcripts of the Videos appear below. 

FIXED COSTS: IN ON SUNDAY! COURSE CONTENTS LIST AND BOOKING FORM HERE!

Details of the courses are here, and can be booked here.

FIXED RECOVERABLE COSTS: CIVIL LITIGATION

PART I – INTRODUCTION

• Guideline Hourly Rates, Seniority, work done – all irrelevant

• Indemnity Principle does not apply.

• No Budgeting

• Shortened form of Detailed Assessment

• What is Covered

• Exclusions

PART II – CONTRACTING OUT

• In advance of the contract

• During Litigation

• Contracting in to Fixed Recoverable Costs

• Case Law

PART III – TRANSITIONAL ARRANGEMENTS

• Trigger dates

• Ongoing unissued cases

PART IV – TRACKS, BANDS AND STAGES

• The Four Tracks

• The Four Complexity Bands

PART V – THE INTERMEDIATE TRACK

• Allocation and Assignment

• The Fifteen Stages

• The Procedure

PART VI – THE FIGURES

• Fast Track

• Intermediate Track

• London Weighting

• Non-monetary cases

• Multiple Claims

• Interim Application and Preliminary Issues

• Counterclaims

• Escaping Fixed Costs

   – Vulnerable Litigants

   – Exceptional Circumstances

• Litigants in Person

• Inflation

PART VII – COUNSEL

• Stages 2 and 7

• Advocacy 

PART VIII – PART 36, UNREASONABLE CONDUCT, AND LONDON WEIGHTING

• The New Rule

• 35% Uplift on Part 36

• Claimants’ Offers

• Defendants’ Offers

• 50% uplift or reduction on Unreasonable Conduct

• London Weighting

• Counsel’s Fees

• Experts and Other Disbursements

• The order of applying the uplifts

PART IX – PERSONAL REPRESENTATIVES AND TRUSTEES

• Personal Representatives, Trustees and Fixed Costs       

• Estate Claims Arising from Personal Injury: Which Fixed Recoverable Costs Regime?

• Trustees, Costs for And Against, And Indemnities

• Part 36 And Trustees

• Estate And Dependency Claims and Conditional Fee Agreements

PART X – PROPERTY LITIGATION

• Exclusions

• Non-monetary Relief

PART XI – EXPERTS

• No Fixed Costs

• Wasted Costs Orders Against Experts

• Limit on Length of Reports

PART XII – FUNDING ARRANGEMENTS

• Revisiting the Retainer

• The Underwoods Method

• Contingency Fee Agreements

• Conditional Fee Agreements

• Section 74 (3) Solicitors Act 1974

• Template Letter re Section 74 (3)

FIXED RECOVERABLE COSTS: PERSONAL INJURY

PART I – INTRODUCTION

• Guideline Hourly Rates, Seniority, work done – all irrelevant

• Indemnity Principle does not apply

• No Budgeting

• Shortened form of Detailed Assessment

• What is Covered

• Exclusions

PART II – CONTRACTING OUT

• In advance of the contract

• During Litigation

• Contracting in to Fixed Recoverable Costs

• Case Law

PART III – TRANSITIONAL ARRANGEMENTS

• Trigger dates

• Ongoing unissued cases

PART IV – TRACKS, BANDS AND STAGES

• The Four Tracks

• The Four Complexity Bands

PART V – THE INTERMEDIATE TRACK

• Allocation and Assignment

• The Fifteen Stages

• The Procedure

PART VI – THE FIGURES

• Fast Track & The Portals

• Intermediate Track

• Noise Induced Hearing Loss Claims

• London Weighting

• Non-monetary cases

• Multiple Claims

• Interim Application and Preliminary Issues

• Counterclaims

• Escaping Fixed Costs

   -Vulnerable Litigants

   -Exceptional Circumstances     

• Litigants in Person

• Inflation

PART VII – COUNSEL

• Stages 2 and 7

• Advocacy

PART VIII – PART 36, UNREASONABLE CONDUCT, AND LONDON WEIGHTING

• The New Rule

• 35% Uplift on Part 36

• Claimants’ Offers

• Defendants’ Offers

• 50% uplift or reduction on Unreasonable Conduct

• London Weighting

• Counsel’s Fees

• Experts and Other Disbursements

• The order of applying the uplifts

PART IX – PERSONAL REPRESENTATIVES AND TRUSTEES    

• Personal Representatives, Trustees and Fixed Costs

• Estate Claims Arising from Personal Injury: Which Fixed Recoverable Costs Regime?

PART X – EXPERTS

• No Fixed Costs

• Wasted Costs Orders Against Experts

• Limit on Length of Reports

PART XI – QUALIFIED ONE-WAY COSTS SHIFTING

PART XII – FUNDING ARRANGEMENTS

• Revisiting the Retainer

• The Underwoods Method

FIXED COSTS: COMING IN SUNDAY!

Book here – still places on London next week, and then Cardiff, Manchester, Liverpool, Leeds, Newcastle and Birmingham.

FIXED RECOVERABLE COSTS EXTENSION TOUR – PRESENTER KERRY UNDERWOOD

Kerry is the acknowledged expert on this subject and his first book on it – Fixed Cost – was published in 2004 and he advised Lord Justice Jackson extensively on this subject.

This lecture tour deals with the extension of Fixed Recoverable Costs on 1 October 2023 to virtually all Civil Litigation claims valued at £100,000 or less, with all non-personal injury claims issued on or after Sunday, 1 October 2023 caught, so cases in the cabinet now will be caught if not issued by then.

There are two separate all-day courses, one dealing exclusively with Personal Injury Cases and the various fixed costs regimes, and one dealing with Civil Litigation only, excluding Personal Injury.

From 5.00pm –6.00pm, is a session about the relationship between solicitors and barristers – free to anyone attending either of the all-day courses. Barristers will find this helpful as a free-standing course.

After that, there is a Curry with Kerry event price £30 including the curry, but not drinks, which is a chance to socialize and chat about these matters in a more relaxed way.

The course includes snacks, drinks and lunch as well as detailed and extensive electronic course material.

It also includes three one-hour Zoominars in January, March, and May 2024, at no extra cost, for Kerry to give updates as to how the new scheme is bedding in.

It also includes free copies of Kerry’s three-volume book – Kerry on Personal Injury Small Claims, Portals and Fixed Costs together with my book on Qualified One-Way Costs Shifting, Section 57 and Setoff.

Book here.

Headline price is £300 plus VAT per course (includes lunch and electronic course material). 10% further discount for a second delegate, and 20% discount for further delegates.

In-House

These courses can be adapted and tailored to an in-house presentation. For further information, contact Kerry on kerry.underwood@lawabroad.co.uk.

TIME AND THE CLIENTS: THE NEW FIXED COSTS SCHEME COMMENCING 1 OCTOBER 2023

Fixed Recoverable Costs Extension: Autumn Course Details

Details of the courses are here, and can be booked here.

The new Fixed Recoverable Costs Scheme, in on 1 October 2023 and covering virtually all civil claims up to £100,000, takes no account of the level of fee earner, nor the time spent on the matter.

Part 36 is changed so that a party which is successful in relation to its Part 36 offer will get a 35% uplift on costs, rather than indemnity costs.

Where indemnity costs would have been ordered due to unreasonable conduct, there will now be a 50% uplift in costs, or a 50% reduction.

Consequently, on a between the parties’ basis, there will never need to be a time, or level of fee earner, based assessment and this is a deliberate policy to avoid the need for detailed assessment, and I quote from the Government’s report, “and the keeping of records to inform an assessment”.

However, let us assume that a firm adopts the Underwoods Method, endorsed by the High Court, and caps the total charge to the client, whether that be by way of the success fee and/or unrecovered solicitor and own client costs.

How do you calculate that solicitor and own client shortfall?

Do you need to carry on charging by reference to the level of fee earner and an hourly rate? indeed will a court allow recovery under the Solicitors Act 1974 if you charge on this basis?

As it stands, firms will be free to carry on charging clients on an hourly rate basis, and seeking to recover, say, a capped sum of 35% of damages by utilizing the success fee and unrecovered solicitor and own client costs, but the Government has made it clear that firms will not be expected to keep time records, or records of who did the work, in relation to fixed recoverable costs matters.

Consequently, a firm could say to a client that the fees will always be, say, 30% higher than fixed recoverable costs, but capped at 35% of damages, or whatever.

A deduction from damages needs to be justified, and is not an entitlement, but a solicitor can justify that deduction by a fixed fee, or a percentage uplift on fixed recoverable costs, or whatever.

I disagree with the view that the court will expect lawyers to time record for the purposes of the Solicitors Act 1974. Hourly rates have only been sanctioned by the Solicitors Act 1974 since amendments were inserted in 1990, by the Courts and Legal Services Act 1990. It would make sense, in the context of fixed recoverable costs cases, to prohibit them again.

When I started work, it was very rare for work to be done on a time basis.

Here are the amendments.

57 Non–contentious business agreements.

(1)Whether or not any order is in force under section 56, a solicitor and his client may, before or after or in the course of the transaction of any non–contentious business by the solicitor, make an agreement as to his remuneration in respect of that business.

(2)The agreement may provide for the remuneration of the solicitor by a gross sum [F1or by reference to an hourly rate], or by a commission or percentage, or by a salary, or otherwise, and it may be made on the terms that the amount of the remuneration stipulated for shall or shall not include all or any disbursements made by the solicitor in respect of searches, plans, travelling, [F2taxes] , fees or other matters.

Textual Amendments

F1S. 57(2) words inserted by Courts and Legal Services Act 1990 (c. 41, SIF 76:1), s. 98(2)

59 Contentious business agreements.

(1)Subject to subsection (2), a solicitor may make an agreement in writing with his client as to his remuneration in respect of any contentious business done, or to be done, by him (in this Act referred to as a “contentious business agreement”) providing that he shall be remunerated by a gross sum [F1or by reference to an hourly rate], or by a salary, or otherwise, and whether at a higher or lower rate than that at which he would otherwise have been entitled to be remunerated.

Textual Amendments

F1Words inserted by Courts and Legal Services Act 1990 (c. 41, SIF 76:1), s. 98(5)

It will be difficult for a solicitor reasonably to justify a bill by reference to time spent, and presumably the level of fee earner, where Parliament has specifically stated that precisely those two factors must not, under any circumstances, be taken into account in deciding costs between the parties.

The new Fixed Recoverable Costs Scheme is essentially a civil litigation one, rather than a personal injury one, in the sense that most sub £25,000 personal injury claims are covered already, and most of the exceptions to the £25,000 to £100,000 band are personal injury ones, for example, clinical negligence, noise induced hearing loss, historic sexual abuse, package holiday claims etc.

It is not the fact as such that there is a deduction from damages, as in civil litigation cases, generally someone wins, and someone loses, and solicitors will be acting for losing parties who have recovered no damages.

That is true in personal injury matters, but Qualified One-Way Costs Shifting means that claimants, absent misconduct, do not pay costs. The position is very different in relation to general civil litigation.

Section 74(3) of the Solicitors Act 1974 applies to all County Court matters, and by definition any matter subject to fixed recoverable costs must be in the County Court.

CPR 46.9 applies to all cases.

FIXED RECOVERABLE COSTS: AN A – Z OF SOME BASICS

Fixed Recoverable Costs Extension: Autumn Course Details

Details of the courses are here, and can be booked here.

A. ADVOCACY FEES

Advocacy fees are fixed and are a freestanding add-on to Fixed Recoverable Costs and apply and are fixed whatever the status of the advocate and whatever their length of call/admission.

Thus, a KC or senior solicitor receives exactly the same advocacy fee as a newly admitted advocate.

B. BUDGETING

Costs budgeting has no place in any Fixed Recoverable Costs case.

BANDS

Fixed Recoverable Costs cases fall into four Complexity Bands and the higher the number of the band,

the higher the fee.

C. COUNSEL

Counsels’ fees, apart from advocacy, are fixed and ring-fenced at various stages of the proceedings and

the seniority of counsel is irrelevant and a KC receives the same fee as a newly called barrister.

COMPLEXITY BANDS

These are the same bands of complexity. They are complex.

CONTRACTING OUT

D. DETAILED ASSESSMENT

Detailed assessment has no place in any Fixed Recoverable Costs case

– see Nema v Kirkland [2019] EWHC B15 (Costs) (23 August 2019)

E. EXCLUSIONS

EXPERT AND WASTED COSTS

F. FAST TRACK

FUNDAMENTAL DISHONESTY

Fundamental dishonesty applies in full in relation to all personal injury claims whether subject to Fixed

Recoverable Costs or not.

G. GUIDELINE HOURLY RATES

H. HOURLY RATES – Gone

I. INDEMNITY PRINCIPLE

Indemnity principle has no place in Fixed Recoverable Costs cases

– see Nizami v Butt [2006] EWHC 159 (QB)

Indemnity costs have been abolished as between the parties in Fixed Recoverable Costs cases.

INTERIM APPLICATIONS

INTERMEDIATE TRACK

J. JUDICIAL REVIEW

K. KERRY – He knows a bit about all this 🙂

L. LONDON WEIGHTING

M. MULTIPLE CLAIMS

N. NON-MONETARY CLAIMS

O. ONGOING UNISSUED CASES

P. PART 36

PERSONAL REPRESENTATIVES

Q. QUALIFIED ONE-WAY COSTS SHIFTING

R. REALLOCATION

RE-ASSIGNMENT

S. SOLICITOR AND OWN CLIENT ASSESSMENTS

SCOPE

T. TRIGGER DATES

TRACKS

TRUSTEES

U. UNDERWOODS METHOD

V. VULNERABILITY

W. WASTED COSTS

X. X-RATED – The quality of the new Civil Procedure Rules.

Y. WHY DIDN’T THEY DRAFT THESE RULES PROPERLY?

Z. ZOO – Where the authors of some of these Rules presumably live.

FIXED COSTS: ALL CHANGE! 18 DAYS TO GO!

Kerry is doing the courses; more information here and you can book here.

First Civil Litigation ones are Newcastle, this Thursday, 14 September 2023, and Hemel Hempstead, next Wednesday, 20 September 2023.

Further courses are in Plymouth, Cardiff, London, Manchester, Liverpool, Leeds, Newcastle, and Birmingham

The introduction of fixed recoverable costs in relation to nearly all civil litigation claims valued at £100,000 or less represents the biggest change for civil litigators since the implementation of the Woolf Report, and the consequent introduction of the Civil Procedure Rules over 20 years ago.

These reforms relate primarily to civil litigation, but much personal injury work is caught by them.

In relation to costs, it is arguably the most significant change since lawyers were first allowed to charge for court work, that is since the Attorneys and County Court Act 1235, which I wrote about in Issue 42 at pages 123-124 – ATTORNEYS AND COUNTY COURT ACT 1235.

So that is arguably the biggest change in costs for 788 years.

Background

In his 2016 book – The Reform of Civil Litigation – Lord Justice Jackson wrote

Kerry Underwood’s prediction. In 2006, Kerry Underwood published the second edition of his book Fixed Costs. Chapter 1 began with a bold statement: “Fixed costs represents an opportunity to rescue a civil justice system that, like most public services, is in terrible trouble.” Chapter 1 predicted that fixed costs would spread quickly from the RTA scheme to other areas of litigation.

What was the position in 2009, when the costs Review began? The position was essentially the same as described in Underwood’s book.

After some phone calls and emails with Lord Justice Jackson I became heavily involved in this Review, resulting in the publication on 31 July 2017 of Lord Justice Jackson’s Supplemental Report

Review of Civil Litigation Costs: Supplemental Report Fixed Recoverable Costs

On 28 March 2019, the Ministry of Justice published its consultation paper:

Extending Fixed Recoverable Costs in Civil Cases: Implementing Sir Rupert Jackson’s Proposals

That consultation paper contained the Government’s proposals for implementing the reforms and needs to be read in conjunction with the final document, published on 6 September 2021 by the Ministry of Justice:

Extending Fixed Recoverable Costs in Civil Cases: The Government Response

All Change

Throw away your time recording system; forget work in progress, forget cost budgeting, and forget assessment proceedings.

Embrace contingent and conditional fees and get to grips with Part 36.

These are the lessons to be learnt from the field of personal injury where fixed recoverable costs have been in for 20 years.

The key points are that recoverable fees are the same irrespective of the level of the fee earner, solicitor or counsel, and irrespective of whether, or when, liability has been admitted.

There will be capped costs if the matte settles pre-issue, and an entitlement to those costs without contractual agreement.

Thus, the moment you write that initial stroppy letter to the other side, you have created a potential adverse cost liability for your client.

This does not arise in personal injury cases, due to the system of Qualified One-Way Costs Shifting, which does not apply in other civil work at present but is likely to spread.

Match or beat your Part 36 offer and you get a straight 35% increase in fees. Even if you are lucky enough to have a profit margin of 35% this doubles your profit; if your profit margin is 17.5%, it trebles your profit on that work.

There is much more to it than this, fixed recoverable costs will be the biggest change in the working lives of most civil litigators.

• Guideline Hourly Rates – irrelevant

• Seniority of lawyer – irrelevant

• Time spent – irrelevant

• Indemnity principle – irrelevant and does not apply

• Budgeting – irrelevant and does not apply

The whole purpose of the new system, and the abolition of indemnity basis for assessment etc, was specifically stated in the Government’s response to avoid the need of detailed assessment

“and the keeping of records to inform an assessment.” (my bold)

FIXED COSTS EXTENSION: CIVIL LITIGATION COURSE CONTENTS

Kerry Underwood, THE expert on Fixed Recoverable Costs is delivering a series of lectures dealing with Civil Litigation and Personal Injury over the next two months.

I set out below an outline of the contents of the Civil Litigation Course. This will form the base of the Personal Injury Course with additional material added.

The costs, including detailed electronic Course Material, refreshments, and lunch, and three free update Zoominars in January, March and May 2024 is £300 plus VAT.

Full details are here, and you can book here.

If you want any further information please contact Karyn Hendricks on 01442 430900 or karyn.hendricks@lawabroad.co.uk.

FIXED RECOVERABLE COSTS: CIVIL LITIGATION

INTRODUCTION

• Guideline Hourly Rates, Seniority, work done – all irrelevant
• Indemnity Principle does not apply
• No Budgeting
• Shortened form of Detailed Assessment
• What is Covered
• Exclusions
• Contracting out:  in Advance: during Litigation

TRANSITIONAL ARRANGEMENTS

• Trigger dates
• Ongoing unissued cases

TRACKS, BANDS AND STAGES

• The Four Tracks
• The Four Complexity Bands
• Allocation and Assignment

THE INTERMEDIATE TRACK

• The Fifteen Stages
• The Procedure

THE FIGURES

• Fast Track
• Intermediate Track
• London Weighting
• Non-monetary cases
• Multiple Claims
• Interim Application and Preliminary Issues
• Escaping Fixed Costs

COUNSEL

• Stages 2 and 7
• Advocacy

PART 36

• The New Rule
• 35% Uplift
• Claimants’ Offers
• Defendants’ Offers

UNREASONABLE CONDUCT

• The New Rule
• 50% Uplift

PERSONAL REPRESENTATIVES, TRUSTEES AND FIXED COSTS

• Estate Claims Arising from Personal Injury: Which Fixed Recoverable Costs Regime?
• Trustees, Costs for And Against, And Indemnities
• Part 36 And Trustees
• Estate And Dependency Claims and Conditional Fee Agreements

PROPERTY LITIGATION

• Exclusions
• Non-monetary Relief

EXPERTS

• No Fixed Costs
• Wasted Costs Orders Against Experts
• Limit on Length of Reports

FUNDING ARRANGEMENTS

• Revisiting the Retainer
• The Underwoods Method
• Contingency Fee Agreements
• Conditional Fee Agreements
• Damages-Based Agreements
• Section 74 (3) Solicitors Act 1974

WASTED COSTS AGAINST EXPERTS AND FIXED COSTS

Fixed Recoverable Costs Extension: Autumn Course Details

Details of the courses are here, and can be booked here.

A reminder that the court has power to make wasted costs orders against experts and this jurisdiction is to be exercised on the same basis as a wasted costs order against a legal representative.

An example of this occurred in

Thimmaya v Lancashire NHS Foundation Trust and another, Manchester County Court, 30 January 2020, Claim No: B57YP861

where a Circuit Judge made a third-party costs order against an expert in the sum of £88,801.68 under section 51 Senior Courts Act 1981.

The expert who appeared for the claimant at trial “was wholly unable to articulate the test to be applied in determining breach of duty in a clinical negligence case”.

As a result, the claimant had to discontinue the case, and the defendant successfully obtained a third-party costs order against him.

The parties agreed, and the court accepted, that the court’s jurisdiction in such a matter is to be exercised on the same basis as a wasted costs order.

Fixed Costs Extension

It is likely that applications for wasted costs against experts will become far more common now that the Fixed Recoverable Costs regime applies to virtually all Civil Litigation valued at £100,000 or less.

The one unfixed element in the Fixed Recoverable Costs scheme is experts’ fees.

However, it is only the actual fees of the expert that are unfixed, and not costs of the solicitors and barristers in dealing with expert evidence.

Thus, the winning party recovers its legal costs on the Fixed Recoverable Costs basis but claims to have incurred significant extra and unnecessary costs due to the conduct of the other party’s expert.

Any additional fee incurred by the winning party’s own expert in dealing with the other side’s expert evidence is recoverable in any event, as that expert’s fees are unfixed, and the court can simply award a higher amount.

The successful party can claim a 50% enhancement on Fixed Recoverable Costs on the grounds of the unsuccessful party’s unreasonable conduct, and this replaces indemnity costs.

However, merely because an expert has behaved badly, it does not necessarily follow that the lawyers have behaved badly, and therefore, a wasted costs application against the expert directly is a way of the successful party recovering costs over and above Fixed Recoverable Costs.

It could also work the other way. A party loses and has to pay Fixed Recoverable Costs but claims that its own costs have been unnecessarily increased by the conduct of the expert for the winning party.

There is nothing to stop a losing party seeking a wasted costs order if the thresholds are met.

DEFECTIVE ROAD INJURY: WHICH FIXED RECOVERABLE COSTS REGIME APPLIES?

Fixed Recoverable Costs Extension: Autumn Course Details

Details of the courses are here, and can be booked here.

In

Bateman v Devon County Council, Plymouth County Court, 2nd September 2019

COMMENT

All personal injury claims where the accident takes place after 30 September 2023, and where the damages are less than £100,000, are now covered by Fixed Recoverable Costs, with limited exceptions such as clinical negligence.

What part of the Fixed Recoverable Costs scheme are defective road injury cases covered by?

PART 36 AND TRUSTEES

Fixed Recoverable Costs Extension: Autumn Course Details

Details of the courses are here, and can be booked here.

In

Price & Anor v Sanders [2019] EWCA Civ 2261

the Court of Appeal considered the circumstances in which a trustee is entitled to be indemnified from the trust fund in respect of costs incurred by the trustee, and awarded against the trustee, in litigation.

The general principle is set out in Section 31(1) of the Trustee Act 2000.

An interesting point in the judgment concerned the effect of the failure by the trustee to beat a Part 36 Offer, and whether that should lead the trustee to lose indemnity in their capacity as trustee.

The Court of Appeal said this:

“In this case, which was essentially hostile litigation, it seems to me that it was a good indicator which ought to have caused the judge to consider Section 31(1) of the 2000 Act and the trustee’s indemnity in the round.

The same is true of the effect of CPR 36.17. Although the failure to meet a Part 36 Offer cannot of itself be determinative of whether a trustee is guilty of misconduct in the conduct of an action such that they should not be entitled to an indemnity from the trust fund, in appropriate circumstances, it may be a material indicator in that assessment. The judge, however, failed to give it any weight.” (Paragraph 43.)

TRUSTEES, COSTS FOR AND AGAINST, AND INDEMNITIES

Fixed Recoverable Costs Extension: Autumn Course Details

Details of the courses are here, and can be booked here.

In

Price & Anor v Sanders [2019] EWCA Civ 2261

the Court of Appeal considered the circumstances in which a trustee is entitled to be indemnified from the trust fund in respect of costs incurred by the trustee, and awarded against the trustee, in litigation.

The general principle is set out in Section 31(1) of the Trustee Act 2000, which provides

(1)  A trustee—

      (a) is entitled to be reimbursed from the trust funds; or

      (b) may pay out of the trust funds,

      expenses properly incurred by him when acting on behalf of the trust.

In relation to the costs of proceedings in which a trustee is or has been involved, there are specific provisions in the CPR.

CPR 46.3 is concerned with the powers of the court to award costs in favour of trustees or personal representatives and it applies where a person is or has been a party to any proceedings in either of those capacities and costs are not payable under a contract to which CPR 44.5 applies.

 The general rule is that such a person:

“(2) . . . is entitled to be paid the costs of those proceedings, insofar as they are not recovered from or paid by any other person, out of the relevant trust fund or estate.”

Those costs will be assessed on the indemnity basis: CPR 46.3(3).

The Rule is supplemented by 46PD.1 which provides:

“1.1 A trustee or personal representative is entitled to an indemnity out of the relevant trust fund or estate for costs properly incurred. Whether costs were properly incurred depends on all the circumstances of the case including whether the trustee or personal representative (“the trustee”)—

(a) obtained directions from the court before bringing or defending the proceedings;

(b) acted in the interests of the fund or estate or in substance for a benefit other than that of the estate, including the trustee’s own; and

(c) acted in some way unreasonably in bringing or defending, or in the conduct of, the proceedings.

1.2 The trustee is not to be taken to have acted for a benefit other than that of the fund by reason only that the trustee has defended a claim in which relief is sought against the trustee personally.

It was common ground that the source of the right to an indemnity is to be found in Section 31(1) of the Trustee Act 2000 and that the provisions of the Civil Procedure Rules can only be a commentary upon and complementary to that Section.

The Court of Appeal said that that must be right, and indeed the point applies to all the provisions of the Civil Procedure Rules.

The policy is designed to ensure that the trustee is not out of pocket when acting as trustee on behalf of the trust and that the trust is efficiently and properly administered.

“The right to an indemnity is part of the fabric of the relationship between the settlor, the trustees and the beneficiaries” – See  Turner v Hancock (1882) 20 Ch D 303   (Paragraph 23)

The Policy poses two questions:

(i) were the expenses properly incurred?; and

(ii) were the expenses incurred by the trustee when acting on behalf of the trust?

The Court of Appeal said the answers to those questions are often far from straightforward and depended upon all the circumstances of the case.

Paragraphs 25 to 31 the Court of Appeal considered the case law in relation to cases specifically concerned with the costs incurred in litigation.

In

McDonald v Horn [1995] ICR 685

the court said:

“While warning that it was ‘well nigh impossible to lay down any general rules which can be depended on to meet the ever varying circumstances of particular cases’, he said that trust litigation could be divided into three categories. First, proceedings brought by trustees to have the guidance of the court as to the construction of the trust instrument or some question arising in the course of administration. In such cases, the costs of all parties are usually treated as necessarily incurred for the benefit of the estate and ordered to be paid out of the fund. Secondly, there are cases in which the application is made by someone other than the trustees, but raises the same kind of point as in the first class and would have justified an application by the trustees. This second class is treated in the same way as the first. Thirdly, there are cases in which a beneficiary is making a hostile claim against the trustees or another beneficiary. This is treated in the same way as ordinary common law litigation and costs usually follow the event.”

Here the Court of Appeal said:

“27.  A similar categorisation was adopted by Lightman J in Alsop Wilkinson v Neary & Ors [1996] 1 WLR 1220. He set out the categories and their likely effect in relation to the trustee’s indemnity at 1223H – 1224G as follows:

“Trustees may be involved in three kinds of dispute. (1) The first (which I shall call “a trust dispute”) is a dispute as to the trusts on which they hold the subject matter of the settlement. This may be “friendly” litigation involving e.g. the true construction of the trust instrument or some other question arising in the course of the administration of the trust; or “hostile” litigation e.g. a challenge in whole or in part to the validity of the settlement by the settlor on grounds of undue influence or by a trustee in bankruptcy or a defrauded creditor of the settlor, in which case the claim is that the trustees hold the trust funds as trustees for the settlor, the trustee in bankruptcy or creditor in place of or in addition to the beneficiaries specified in the settlement. The line between friendly and hostile litigation, which is relevant as to the incidence of costs, is not always easy to draw: see In re Buckton; Buckton v. Buckton [1907] 2 Ch 406. (2) The second (which I shall call “a beneficiaries dispute”) is a dispute with one or more of the beneficiaries as to the propriety of any action which the trustees have taken or omitted to take or may or may not take in the future. This may take the form of proceedings by a beneficiary alleging breach of trust by the trustees and seeking removal of the trustees and /or damages for breach of trust. (3) The third (which I shall call “a third party dispute”) is a dispute with persons, otherwise than in the capacity of beneficiaries, in respect of rights and liabilities e.g. in contract or tort assumed by the trustees as such in the course of administration of the trust.

Trustees (express and constructive) are entitled to an indemnity against all costs, expenses and liabilities properly incurred in administering the trust and have a lien on the trust assets to secure such indemnity. Trustees have a duty to protect and preserve the trust estate for the benefit of the beneficiaries and accordingly to represent the trust in a third party dispute. Accordingly their right to an indemnity and lien extends in the case of a third party dispute to the costs of proceedings properly brought or defended for the benefit of the trust estate. Views may vary whether proceedings are properly brought or defended, and to avoid the risk of a challenge to their entitlement to the indemnity, (a beneficiary dispute), trustees are well advised to seek court authorisation before they sue or defend. . . .

A beneficiaries dispute is regarded as ordinary hostile litigation in which costs follow the event and do not come out of the trust estate: see per Hoffmann L.J. in McDonald v. Horn [1995] I.C.R. 685, 696.”

An interesting point in the judgment is that failure to beat a Part 36 Offer may lead to a loss of indemnity for a trustee.

“In this case, which was essentially hostile litigation, it seems to me that it was a good indicator which ought to have caused the judge to consider Section 31(1) of the 2000 Act and the trustee’s indemnity in the round.

The same is true of the effect of CPR 36.17. Although the failure to meet a Part 36 Offer cannot of itself be determinative of whether a trustee is guilty of misconduct in the conduct of an action such that they should not be entitled to an indemnity from the trust fund, in appropriate circumstances, it may be a material indicator in that assessment. The judge, however, failed to give it any weight.” (Paragraph 43.)

Comment:

A helpful judgment in a difficult area of the law.

It would be useful if there was a corps of specialist judges who could give interim judgments on these points, that is in advance as to whether a trustee will enjoy indemnity in any given scenario, or, if in another field, a personal injury claimant will, or will not, enjoy the protection of Qualified One-Way Costs Shifting.

EMAIL TRAILS: VERY EXPENSIVE THINGS

Fixed Recoverable Costs Extension: Autumn Course Details

Details of the courses are here, and can be booked here.

In Issue 159 – COSTS OF £20,000 AGAINST BARRISTERS’ CHAMBERS IN EMPLOYMENT TRIBUNAL

I looked at

Bailey -v- Stonewall Equality Ltd, Garden Court Chambers & others, Case No.: 2202172/2022

where the Employment Tribunal ordered Garden Court Chambers to pay £20,000 costs in relation to its unreasonable conduct in preparing the trial bundles for a discrimination case brought by one of its own barristers.

However, the Employment Tribunal also found as one of its reasons for ordering costs the presence of email chains saying:

“Email chains are often problematic – it is best to eliminate duplication, but this cannot always be achieved where it is necessary to show who is sending an email in reply to what, and in what sequence, especially where there are branching emails, and not everyone has sight of other replies. Pragmatic solutions have to be found.”

“35. Much later it became clear that much of the puzzle over missing emails was because Garden Court had severed (“chopped up”) strings of emails to show separate emails in chronological order, and then pasted them in a single thousand page PDF. It was only when this was uploaded to a shared drive on 16 March that the claimant was able to see that, and that it did not include what was, in their view, relevant material.”

Well said.

The judgment also contains a detailed analysis of the case law in relation to the grounds for awarding costs in the Employment Tribunal.

CIVIL PROCEDURE RULES ONLY A COMMENTARY ON ACT OF PARLIAMENT

Fixed Recoverable Costs Extension: Autumn Course Details

Details of the courses are here, and can be booked here.

In the eyes of many practitioners, and some courts, the Civil Procedure Rules seem to have developed a life of their own, and it is not always borne in mind that they are achieved by secondary legislation and cannot override an Act of Parliament.

This issue arose in

Price & Anor v Sanders [2019] EWCA Civ 2261

There the Court of Appeal was considering the circumstances in which a trustee is entitled to be indemnified from a trust fund in respect of costs incurred by the trustee, and awarded against the trustee, in litigation.

The general principle is set out in Section 31(1) of the Trustee Act 2000.

Here there was discussion as to the interplay between that provision and CPR 46 and the associated Practice Direction.

The Court of Appeal said that the provisions of the Civil Procedure Rules can only be a commentary upon and complementary to that Section.

The point applies to all the provisions of the Civil Procedure Rules.

As ever, the starting point is to drink from the pure fountain of statute law.

STATUTORY BILLS: NO REQUIREMENT TO INFORM CLIENT OF ASSESSMENT PROCEDURE

Fixed Recoverable Costs Extension: Autumn Course Details

Details of the courses are here, and can be booked here.

Most solicitors have on the face of a statutory bill information about the client’s right to seek assessment under the Solicitors Act 1974, and it has been widely assumed that this was a requirement of a statutory bill.

More recently, the courts have been stating that this is not necessary.

In my view, it is still good practice, and can never be criticized, but if for any reason, you have not included this information on the face of the bill, then it does not detract from the bill being a statutory bill within the meaning of the Solicitors Act 1974.

I suspect that the inclusion of this information of the face of the bill stems from the time when clients had a right to seek a Remuneration Certificate from the Law Society – remember that?

Then it was compulsory to include such information on the face of the bill.

In

Menzies v Oakwood Solicitors Ltd [2023] EWCA Civ 844 (14 July 2023)

the Court of Appeal put the matter beyond doubt.

“Other requirements in relation to statutory bills

25. The right to an assessment under section 70 is to an assessment of a solicitor’s “bill”. It was common ground that the reference to a “bill” is to a bill that complies with the requirements of section 69 of the 1974 Act. It was also common ground that the bill in this case was a compliant bill. We should mention at this point that it is not a statutory requirement that a bill should inform the client of their right to an assessment. In Richard Slade and Company plc v. Erlam [2022] EWHC 325 (QB), [2022] Costs LR 489, HHJ Gosnell, sitting as a judge of the High Court, said:

25. … When dealing with a client’s right to seek an assessment of costs from his or her solicitors the Act seeks to strike a balance between allowing a reasonable time for a client to question the quantum of costs whilst protecting solicitors from having to deal with stale allegations of overcharging. Whilst the Act purports to regulate those rights it does not go so far as to oblige the solicitor to advise the client of these provisions in terms, nor to explain in plain English what the actual consequences of the application of those terms are for the client. I am personally sympathetic to the argument that it probably should.

26. Both counsel advised me that there are no regulations either connected with the [1974 Act] or Code of Conduct, arising from their obligations as a solicitor, which would oblige solicitors to explain to clients that the effect of the service of an interim statute bill (properly authorised by the retainer) would be to start the clock running for a potential [1974 Act] assessment and that there are different time limits depending on the circumstances.”

FIXED RECOVERABLE COSTS EXTENSION TOUR – PRESENTER KERRY UNDERWOOD

Kerry is the acknowledged expert on this subject and his first book on it – Fixed Cost – was published in 2004 and he advised Lord Justice Jackson extensively on this subject.

This lecture tour deals with the extension of Fixed Recoverable Costs on 1 October 2023 to virtually all Civil Litigation claims valued at £100,000 or less, with all non-personal injury claims issued on or after Sunday, 1 October 2023 caught, so cases in the cabinet now will be caught if not issued by then.

There are two separate all-day courses, one dealing exclusively with Personal Injury Cases and the various fixed costs regimes, and one dealing with Civil Litigation only, excluding Personal Injury.

From 5.00pm –6.00pm, is a session about the relationship between solicitors and barristers – free to anyone attending either of the all-day courses. Barristers will find this helpful as a free-standing course.

After that, there is a Curry with Kerry event price £30 including the curry, but not drinks, which is a chance to socialize and chat about these matters in a more relaxed way.

The course includes snacks, drinks and lunch as well as detailed and extensive electronic course material.

It also includes three one-hour Zoominars in January, March, and May 2024, at no extra cost, for Kerry to give updates as to how the new scheme is bedding in.

It also includes free copies of Kerry’s three-volume book – Kerry on Personal Injury Small Claims, Portals and Fixed Costs together with my book on Qualified One-Way Costs Shifting, Section 57 and Setoff.

Book here.

Headline price is £300 plus VAT per course (includes lunch and electronic course material). 10% further discount for a second delegate, and 20% discount for further delegates.

In-House

These courses can be adapted and tailored to an in-house presentation. For further information, contact Kerry on kerry.underwood@lawabroad.co.uk.

PERSONAL REPRESENTATIVES, TRUSTEES AND FIXED COSTS

Fixed Recoverable Costs Extension: Autumn Course Details

Details of the courses are here, and can be booked here.

Below I set out my write-up of the Court of Appeal judgment in

Price & Anor v Sanders [2019] EWCA Civ 2261

This is a useful guide in any event to the indemnity that trustees enjoy in respect of costs incurred by the trustee in conducting litigation on behalf of the trust, and in relation to costs awarded against the trustee in such litigation.

Under the pre-1 October 2023 Regime solicitors would advise trusts and trustees in the traditional way, that is that generally costs follow the event and the loser pays the costs of the winner, with the additional proviso that the individual trustee would generally get an indemnity from the trust.

In relation to all such proceedings issued on or after 1 October 2023, irrespective of when the underlying dispute arose, these cases will now be subject to Fixed Recoverable Costs if the claim is for £100,000 or less.

Each case will depend upon the facts, but my instinct is that generally such matters will go into complexity Band 4, that is the highest band attracting the highest costs.

The Fixed Recoverable Costs Scheme does, of course, cut both ways, a fact seemingly lost on lawyers, but most certainly not lost on their clients.

Thus, if a trust or an estate launches litigation covered by the Fixed Recoverable Costs Scheme then of course the recoverable costs are fixed, but so is the maximum exposure of the trust or the estate and thus, trustees and personal representatives are in a far better position to judge whether a claim can be brought without jeopardizing the trust fund or the estate.

After-the-Event insurance will also be much easier to obtain as insurers love the certainty of maximum exposure.

Thus, the position in relation to exposure to costs on a lost case is much improved for personal representatives, trustees and those advising them.

The other side of that coin is that on success the recoverable costs will also be fixed, and therefore there is likely to be a greater shortfall between recovered costs and solicitor and own client costs.

This can be mitigated by the retainer between the trust or estate and the solicitors, and it may be that the solicitors will agree to cap costs at say Fixed Recoverable Costs plus 25% of the money recovered or preserved.

Another way of doing it is for the solicitors to agree to cap the solicitor and own client element to say 30% above the Fixed Recoverable Costs.

There are endless possibilities, but the key point is that the previously uncertain element, out of the control of the trust or estate, and that is the other side’s costs on defeat, has now become certain.

Solicitor and own client costs can be made certain by the appropriate retainer between the trust/estate and their own solicitor.

ESTATE CLAIMS ARISING FROM PERSONAL INJURY: WHICH FIXED RECOVERABLE COSTS REGIME?

Fixed Recoverable Costs Extension: Autumn Course Details

Details of the courses are here, and can be booked here.

The Fixed Recoverable Costs Extension Scheme is effective from 1 October 2023, but there is a sharp difference in the transitional arrangements as between personal injury claims and all other civil litigation claims.

In relation to civil litigation claims the trigger date is the date of the issue of proceedings, irrespective of when the cause of action arose.

If proceedings are issued on or after the 1 October 2023 in any ordinary civil litigation claim, then the new Fixed Recoverable Costs Scheme applies.

In relation to personal injury matters the trigger date is the date when the injury or accident took place, even if proceedings are not issued until say 2026.

Thus, in personal injury cases the old scheme will continue to apply in relation to all injuries or accidents occurring up to midnight on 30 September 2023.

Broadly, that scheme captures claims valued at £25,000 or less, with some exceptions such as clinical negligence, with claims valued at £25,000 or above not being caught at all.

What happens when there has been a pre-1 October 2023 injury and the injured person dies, but proceedings are not issued until after 30 September 2023?

The action on behalf of the injured person, being a personal injury action, will be subject to the old regime, but the action on behalf of the estate, not being a personal injury action itself, will be subject to the new regime.

Thus, the same case will be subject to a mixture of Fixed Recoverable Costs and old, open, standard costs.

It would make sense to say that any action of any kind, which arises from an injury should be subject to the system of costs in place when the injury occurred.

A CASE FOR INTERIM DECLARATIONS AS TO FINAL COSTS

Fixed Recoverable Costs Extension: Autumn Course Details

Details of the courses are here, and can be booked here.

Trustees

We all know that the general rule is that costs follow the event, that is that the loser pays the winner, and although that is hedged round with qualifications, it is generally a fairly straightforward thing for lawyers to advise clients of that principle.

However, there are many situations where a litigant will not find out until the end of the case whether they in fact enjoy the protection that they thought they had.

Examples include:

(i) Trustees;

(ii) Cases where Qualified One-Way Costs Shifting may or may not apply;

(iii) Part 36.

I have recently written up the case of

Price & Anor v Sanders [2019] EWCA Civ 2261

under the title

TRUSTEES, COSTS FOR AND AGAINST, AND INDEMNITIES

As the name suggests, the case deals with the indemnity enjoyed by trustees in conducting litigation, and the circumstances in which it may be lost.

It would be helpful and fairer to all parties if a declaration could be made early on as to whether a trustee did enjoy indemnity in the case, or whether it was essentially hostile litigation which deprives the trustee of that protection.

Qualified One-Way Costs Shifting

The same applies in Qualified One-Way Costs Shifting cases, where the starting point is that a claimant in personal injury matters has a costs order made against her or him on defeat, but that cannot generally be enforced.

There are many exceptions, and few of us would have difficulty with the fact that where the claimant has behaved dishonestly or there has been an abuse of process, then the claimant should be deprived of those costs.

However, there are many more difficult issues, where there has been no blameworthy conduct by the claimant.

For example, protection may be lost if the claim is a mixed one, that is partly for personal injuries and partly for something else.

It may also be lost if the claim is for the benefit of another.

Again, it would be helpful if an interim declaration could be made by a judge stating, for example, that it is a mixed claim and the claimant will enjoy protection as to 40% of the costs, or whatever.

Part 36

By definition the parties will not know where the incidence of costs lies until it is known whether or not an offer has been beaten, and there is no easy way round that.

However, where there is an issue as to the validity of a Part 36 Offer, then again there could be an early declaration by a judge on this point.

These would generally be fairly short points and could be dealt with by a corps of specialist judges.

SERVICE OF STATUTORY BILLS UNDER THE SOLICITORS ACT 1974

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Following the landmark decision of the Court of Appeal in

Menzies v Oakwood Solicitors Ltd [2023] EWCA Civ 844 (14 July 2023)

that the deduction of costs from damages by the solicitors in personal injury cases amounted to payment, thus triggering the Solicitors Act 1974 time limits, provided that the client had authorized in the retainer such deduction, it is apparent that bills which before Menzies may not have thought to have been Solicitors Act 1974 compliant statutory bills in fact were as clearly information to be given to clients in such bills where they have previously authorised the deduction, is much less.

I wrote up the Menzies decision in Issue 164 on 2 August 2023 under the heading –

JG SOLICITORS COMPLAINTS MODEL: COURT OF APPEAL ENDS IT

at pages 1040 – 1046, and in the same Issue at page 1048, I published a piece –

STATUTORY BILLS POST MENZIES

dealing with this very point.

Another technical issue which can arise is as to whether a Solicitors Act 1974 compliant bill was validly served within the meaning of the Solicitors Act 1974. I deal with that here.

SOLICITORS BILLS UNDER THE SOLICITORS ACT 1974: SIGNATURE AND SERVICE

In Elias v Wallace LLP [2022] EWHC 2574 (SCCO)

the Senior Courts Costs Office – the Senior Costs Judge presiding – dismissed the Claimant’s application for delivery of a statute bill under Section 68 of the Solicitors Act, where the Claimant argued that the six invoices issued to him were not statute bills, as they were not signed and the emails that accompanied them were not letters and that they were not delivered to him.

The Court held that the solicitors had already delivered a final statute bill.

The Court considered novel issues regarding electronic signature and delivery of a solicitors bill in compliance with Section 69 of the Solicitors Act 1974.

The Court said that the bills were:

(i) Chamberlain bills and had sufficient information for the Claimant to know what he was being charged, and they become a statute bill on delivery of the final bill;

(ii) The Claimant had consented to communication by email;

(iii) The electronic signature on the email that accompanied the bills was sufficient for the purposes of the Solicitors Act 1974.

Each of the invoices had been accompanied by time records and were sent as an attachment to an email, describing the work done, the time spent, the fee earner involved, and the hourly rate applied.

The Court said that that provided sufficient information to the client to enable him to form a view as to the reasonableness of the charges.

It was common ground that the invoices did not have a wet ink signature and existed only in electronic form, but each bore the firm’s name, the firm’s logo and contact details.

The Court said that whoever created the invoice included a template with the name and address, and there was no evidence that they were authorized to sign it, but with each invoice concluding with the name and title of one of the firm’s partners, the email footer was “clearly applied” with authenticating intent.

While the firm’s printed name on the invoices did not satisfy the definition of signature in Section 7(2) of the Electronic Communications Act 2000, the electronic signatures on accompanying emails were valid signatures for the purposes of Section 69(2B) of the Solicitors Act 1974.

The fact that the email footer was generated automatically did not change the position – Neocleous & Anor v Rees [2019] EWHC 2462 (Ch)

The Court held that the electronic signatures on the emails were electronic signatures for the purposes of Section 69(2B) of the Solicitors Act 1974.

The Court said that the bills could be authorized through a signature on the bill or on the communication accompanying it, and emails were “letters” for the purposes of Section 69(2A)(b) of the Solicitors Act 1974.

Letters

“Letter” was not defined in the Solicitors Act 1974.

Any such definition in other statutes should be viewed in the context of the particular statute.

For the Solicitors Act 1974, it would be difficult to hold that an email was a letter without applying an updating construction to that statute, but the court would apply an updating construction to legislation unless the statute in question was intended to apply as it was passed and without change.

There was nothing to suggest that Parliament had intended that the Solicitors Act 1974 should be preserved in aspic; the amendments recognising the use of electronic signatures made that clear.

Although it could be argued that the omission to amend the reference to “letter” to include an email was intentional, it was not clear whether it was intentional or an oversight.

The purpose of section 69(2A) was to convey to the client that the bill had been authorised by the solicitor, and that could be done by either a signature on the bill or a signature on the communication that accompanied the bill.

Solicitors’ bills were sent to clients either by post, usually with an accompanying letter, or by email, or sometimes by both means.

It would be absurd if a solicitor, sending a bill by email, were required to send, as another attachment, a letter which contained no more information than that contained in the email.

Accordingly, applying an updating construction, an email was a letter for the purposes of section 69(2A)(b) of the SA 1974.

The Court had this to say:

“31. “Letter” is not defined in the 1974 Act. In common usage, an email beginning with the salutation “Dear” and ending with felicitations might be thought of as a letter. However the OED definition might suggest otherwise:

“A written communication addressed to a person, organization, or other body, esp. one sent by post or messenger; an epistle.”

Definitions in other statutes, for example that in s.125 of the Postal Services Act 2000, would also suggest a requirement of physicality:

“letter” means any communication in written form on any kind of physical medium to be conveyed and delivered otherwise than electronically to the person or address indicated by the sender on the item itself or on its wrapping (excluding any book, catalogue, newspaper or periodical); and includes a postal packet containing any such communication”

32. Such a definition should of course be viewed in the context of the particular statute. A definition of letter in a statute dealing with the physical carriage of post may well be different to that in a statute concerned with the communication of information. Given that the point is not clear, I think that it would be difficult to conclude that an email is a letter for the purposes of the1974 Act without applying an updating construction to that particular statute.

33. It is clear that the courts will apply an updating construction to legislation unless the particular Act is intended to apply as it was passed and without change: Bennion, Bailey and Norbury on Statutory Interpretation (8th ed) section 14.1. There is nothing to suggest that Parliament intended that the 1974 Act should be preserved in aspic. Indeed the amendments which recognised the use of electronic signatures make that clear.

34. In Attorney General v Edison Telephone Co of London Ltd (1880) 6 QBD 244, the question was whether communications by telephone, invented after the Telegraph Act 1869, fell within the definition of “telegram” in that Act. The Postmaster-General had the exclusive right of transmitting telegrams. Stephen J noted that the purpose of the Act was to create that monopoly and that:

“Of course no one supposes that the legislature intended to refer speci?cally to telephones many years before they were invented, but it is highly probable that they would, and it seems to us clear that they actually did, use language embracing future discoveries as to the use of electricity for the purpose of conveying intelligence.”

35. It could be argued that the omission to amend the reference to “letter” to include an email was intentional. However I do not have the material to conclude whether that was intentional or an oversight.

36. In my view the purpose of s.69(2A) is to convey to the client that the bill has been authorised by the solicitor. That can be done by either a signature on the bill or a signature on the communication that accompanies the bill. In my experience solicitors’ bills are sent to clients either by post, usually with an accompanying letter, or by email. Sometimes they are sent by both means. It would, as Mr Griffiths submits, be absurd if a solicitor, sending a bill by email, were required to send, as another attachment, a letter in pdf form which contained no more information than that contained in Mr Weinberg’s email.

37. Accordingly, in my judgment, applying an updating construction, an email is a letter for the purposes of s.69(2A)(b).”

Service

The Court held that the following clause in the terms of business amounted to consent by the client to service of the bill by email:

“39. Clause 24.3 provided that:

“You [the client] agree that we may serve formal notices and documents (including service of any legal proceedings) upon you by email, or any other method of electronic communications permitted by law, by using any email address or other electronic identification that you have provided to us, or that you have used for communicating with us.””

Were Invoices Delivered?

The defendant relied on a clause in its terms of business entitling it to serve formal notices and documents by email.

Although the relevant clause in the terms of business did not specifically refer to bills or invoices, it referred to “documents”; the clear intention was that the solicitor was permitted to send documents by email, including formal documents, and that had to include invoices.

It would be absurd if the solicitor was permitted to serve a claim form in respect of unpaid fees by email but not the bill on which the claim was based.

By agreeing to the defendant’s terms of business, the claimant had indicated his willingness to accept delivery of bills by email.

The Judge noted that while the Court of Appeal’s decision in Belsner v Cam Legal Services Ltd [2020] EWHC 2755 (QB) was awaited, that case concerned the requirement for informed consent for an agreement expressly permitting payment to the solicitor of an amount greater than the costs which the client could recover from the other side. (Now delivered and not relevant to the findings here).

The informed consent of the client had never been required for a provision in a solicitor’s retainer specifying the mode of service of documents.

In any event, it was clear that the claimant was willing to communicate by email.

At the outset of the retainer, his daughter had provided his email address and there was no suggestion this was done without his authority, and he had returned his acceptance of the defendant’s terms by email and had responded by email to the emails sending him the invoices.

By that course of conduct, including his acceptance of the first five invoices by email, he had indicated his willingness to accept delivery of bills by email.

Solicitors Act 1974

A bill rendered by a solicitor to their client may be one of three things:

• A “statute bill” (whether interim or final) that is a final bill for the period that it covers, which complies with the requirements of the Solicitors Act 1974 (SA 1974).

• A request for payment of a sum on account or a demand for a payment on account of costs (where accompanied by a demand for payment).

• A “Chamberlain bill”, that is, a series of bills which become a statute bill only upon delivery of the last (after Chamberlain v Boodle & King [1982] 1 WLR 1443).

The delivery of a statute bill triggers a legal obligation for the client to pay the bill (and so the solicitor’s right to sue on the statute bill), and the client’s right to apply to have the bill assessed by the court.

Section 69 of the Solicitors Act 1974 reads:

“69. Action to recover solicitor’s costs.

(1) Subject to the provisions of this Act, no action shall be brought to recover any costs due to a solicitor before the expiration of one month from the date on which a bill of those costs is delivered in accordance with the requirements mentioned in subsection (2); but if there is probable cause for believing that the party chargeable with the costs—

(a) is about to quit England and Wales, to become bankrupt or to compound with his creditors, or

(b) is about to do any other act which would tend to prevent or delay the solicitor obtaining payment,

(iv) the High Court may, notwithstanding that one month has not expired from the delivery of the bill, order that the solicitor be at liberty to commence an action to recover his costs and may order that those costs be assessed.

(2) The requirements referred to in subsection (1) are that the bill must be-

(a) signed in accordance with subsection (2A), and

(b) delivered in accordance with subsection (2C).

(2A) A bill is signed in accordance with this subsection if it is-

(a) signed by the solicitor or on his behalf by an employee of the solicitor authorised by him to sign, or

(b) enclosed in, or accompanied by, a letter which is signed as mentioned in paragraph (a) and refers to the bill.

(2B) For the purposes of subsection (2A) the signature may be an electronic signature.

(2C) A bill is delivered in accordance with this subsection if-

a) it is delivered to the party to be charged with the bill personally,

b) it is delivered to that party by being sent to him by post to, or left for him at, his place of business, dwelling-house or last known place of abode, or

c) it is delivered to that party-

(i) by means of an electronic communications network, or

(ii) by other means but in a form that nevertheless requires the use of apparatus by the recipient to render it intelligible,

and that party has indicated to the person making the delivery his willingness to accept delivery of a bill sent in the form and manner used.”

Where a solicitor can prove that a bill has been delivered in compliance with these two requirements, it is not necessary, in the first instance, for the solicitor to prove the contents of the bill; it is presumed to be a bona fide statute bill (unless the contrary is shown). (Section 69(2E), SA 1974.)

The courts have held that the bill must be reasonably complete and must have sufficient narrative and information to allow the client to identify what the client is being charged for. – See Ralph Hume Garry v Gwillim [2003] 1WLR 510.

In Ralph Hume Garry v Gwillim [2003] 1WLR 510

the Court of Appeal set out in detail what information the bill had to contain:

“63.  I accept the principle expressed in Lord Campbell CJ’s judgment in Cook v Gillard 1 E & B 26 , 36–37 that:

the defendant who undertakes to prove that the bill is not a bona fide compliance with the Act cannot found an objection upon want of information in the bill, if it appears that he is already in possession of that information … a client has no ground of objection to a bill who is in possession of all the information that can be reasonably wanted for the consulting on taxation.

In Eversheds v Osman [2000] 1 Costs LR 54 , 61–63 Nourse LJ posed this test in not dissimilar terms, viz: is the client unable to judge as to the justice of the amount of the fees which are charged?

64 Thus I would accept the proper principle to be that there must be something in the written bill to indicate the ambit of the work but that inadequacies of description of the work done may be redressed by accompanying documents (as in Eversheds v Osman where it was doubtful whether the bill on the face of it would have been sufficient) or by other information already in the possession of the client. That, it seems to me, would serve the purpose of the Act to give the client the knowledge he reasonably needs in order to decide whether to insist on taxation. If the solicitor satisfies that then the bill is one bone fide complying with the Act.

70 This review of the legislation and the case law leads me to conclude that the burden on the client under section 69(2) of the Solicitors Act 1974 to establish that a bill for a gross sum in contentious business will not be a bill “bona fide complying with this Act” is satisfied if the client shows: (i) that there is no sufficient narrative in the bill to identify what it is he is being charged for, and (ii) that he does not have sufficient knowledge from other documents in his possession or from what he has been told reasonably to take advice whether or not to apply for that bill to be taxed. The sufficiency of the narrative and the sufficiency of his knowledge will vary from case to case, and the more he knows, the less the bill may need to spell it out for him. The interests of justice require that the balance be struck between protection of the client’s right to seek taxation and of the solicitor’s right to recover not being defeated by opportunistic resort to technicality.

73. I add this postscript for the profession’s consideration so that an unseemly dispute of this kind does not happen again. Surely in 2002 every second of time spent, certainly on contentious business, is recorded on the account department’s computer with a description of the fee-earner, the rate of charging and some description of the work done. A copy of the printout, adjusted as may be necessary to remove items recorded for administrative purposes but not chargeable to the client, could so easily be rendered and all the problems that have arisen here would be avoided. In these days where there seems to be a need for transparency in all things, is a printout not the least a client is entitled to expect?”

“17. In the present case each of the invoices, apart from those for counsel’s fees and the last invoice for profit costs, were accompanied by time records. They were sent as an attachment to an email which preceded that which attached the invoice. The time records described the work done in respect of each item, the time spent, the fee earner involved and the hourly rate applied. That, it seems to me, provided sufficient information to the client to enable him to form a view as to the reasonableness of the charges.”

Section 7(2) of the Electronic Communications Act 2000 reads:

“For the purposes of this section an electronic signature is so much of anything in electronic form as –

(a) is incorporated into or otherwise logically associated with any electronic communication or electronic data; and

(b) purports to be used by the individual creating it to sign.”

Here, the Court held that the invoices formed a Chamberlain bill.

Although the last invoice was not marked as “final”, it did not refer to “interim professional charges”, which the earlier ones did.

The last email from the Defendant firm of solicitors to the Claimant referred to it as the “final invoice”.

See Vlamaki v Sookias & Sookias [2015] EWHC 3334 (QB)

Comment

This is an important decision relaxing considerably the rules in relation to the signature and service of solicitors bills under the Solicitors Act 1974.

It needs to be seen in conjunction with the Court of Appeal’s decisions in

Belsner -v- Cam Legal Services [2022] EWCA Civ 1387, 27 October 2022

and

Karatysz v SGI Legal [2022] EWCA Civ 1388

The direction of travel is undoubtedly to require less formality in relation to solicitors bills and solicitors’ charges, and to look at the substance and not the form.

Most would regard these as welcome developments.

CONTRACTUAL INTEREST MUST BE PLEADED OR LOST

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In

Rolls-Royce Holdings Plc v Goodrich Corporation [2023] EWHC 2002 (Comm) (01 August 2023)

the Commercial Court, part of the High Court, held that where a party has a contractual right to interest, then that right must be pleaded, and failure to plead it means that that party cannot recover any interest at all, and the court does not have power to award interest under Section 35A of the Senior Courts Act 1981.

The Court said that this reflects a more general principle, namely that if the parties have reached a contractual agreement as to when interest should be paid, then the court will not award interest on some different basis under Section 35A.

In other words, where there is a right to contractual interest, the court has no power to award statutory interest, and if the contractual right to interest is not pleaded, then it cannot be awarded.

Here, Goodrich had obtained judgment for $112,285,440 at trial and sought pre-trial interest on that sum but Rolls-Royce successfully argued that the Court could not award interest as there was an unpleaded contractual right to interest.

Section 35A(4) of the Senior Courts Act 1981 reads:

“(4) Interest in respect of a debt shall not be awarded under this section for a period during which, for whatever reason, interest on the debt already runs.”

The Court held that the effect of Section 35A(4) is to prevent interest being awarded under Section 35A when it is already running for some other reason on the debt and that that could be because the contractual rate of interest is running or because it is a statutory debt on which interest runs.

Section 35A(4) avoids interest being recovered twice on the same debt.

The Court then analysed the case law on the relationship between claims to interest under statute and any contractual rate of interest which the parties have agreed.

i) In Standard Chartered Bank v Ceylon Petroleum Corp [2011] EWHC 2094 (Comm),

the court considered a case in which an ISDA Master Agreement provided for interest to run after judgment at a certain rate, and the issue arose of whether the judgment creditor could obtain interest pursuant to statute at a higher rate. In the course of that judgment, the court referred to s.35A(4) and stated at [10]:

“This means that, where the contract itself fixes interest, the court can only enforce that provision: its statutory power does not override the contractual provision so that it cannot fix a different rate”.

It held that the provision in question did not override the creditor’s right to post-judgment interest.

ii) In Starbev GP Limited v Interbrew Central European Holdings BV [2014] EWHC 2863 (Comm),

a claim was brought under a Contingent Value Right or CVR. At trial, both parties sought declarations as to their rights, one party saying that nothing was due and the other that further sums were due, the amount of which was dependent on the court’s findings.

No money claim was pleaded. After the main judgment, the parties were able to agree the amount due. ICEH sought permission to claim interest pursuant to contract and/or statute after trial.

The court noted at [45] and [46] that there is no requirement to plead a claim to statutory interest, but that there is such a requirement to claim contractual interest. At [46] it stated:

“However, a contractual claim for interest must be pleaded. Where a contract provides for the payment of interest, the agreed terms will normally displace the court’s discretionary power to award interest under section 35A of the Senior Courts Act 1981. This is because the court respects what the parties have agreed as to interest rather than substituting its own discretion. This is recognised in part by s.35A(4), which provides that, “Interest in respect of a debt shall not be awarded under this section for a period during which, for whatever reason, interest on the debt already runs”. This means that, where the contract itself fixes interest, the court can only enforce that provision: its statutory power does not override the contractual provision, so that it cannot fix a different interest rate (Standard Chartered Bank v Ceylon Petroleum Corporation [2011] EWHC 2094 (Comm) at [10], Hamblen J). What applies to interest rates also applies where the parties have agreed as to the circumstances in which interest is payable. Where the parties have agreed that interest is to be payable in particular circumstances, or not payable in particular circumstances, the court will give effect to the parties’ agreement. (Different considerations may apply post-judgment.)”

“11. The words “recognised in part” reflect the fact that a contractual interest rate is not only capable of removing the power to award statutory interest because it engages section 35A(4), but will itself condition the exercise of the statutory discretion. If, for example, the parties had agreed in their contract that no interest was to be awarded on damages, or that interest on damages would run at the rate of 2%, that would tell very strongly against any attempt to obtain statutory interest under s.35A, or to do so at a more favourable rate, even though s.35A(4) would not be engaged.

12. If s.35A(4) is engaged, the statutory discretion to award interest does not arise. Where it is not engaged, but the parties have entered into a contract addressing the circumstances in which interest is to be recoverable, it is possible to approach the issue on the basis that a contractual agreement that interest is payable when certain conditions are met amounts to an agreement that no interest is otherwise payable (cf Barton v Morris [2023] UKSC 3), which agreement the court should enforce by refusing to award statutory interest where the relevant conditions are not met. An alternative, and in my assessment the better, analysis is that the issue is to not be approached on the basis that the court must enforce the parties’ contractual promise, but on the basis that the parties’ agreement is a powerful factor when determining whether the court should exercise its procedural discretion and on what basis. The procedural power to award interest under s.35A is not dependent on the existence of a substantive right to interest under the law governing the relevant obligation (Maher v Groupama Est [2009] EWCA Civ 1191). Further, when discretionary determinations are required in a procedural context, the parties’ contractual arrangements are generally treated as a factor of great weight, rather than determinative (e.g., agreements not to argue that a particular forum is not conveniens: Bank of New York Mellon v GV Films [2009] EWHC 2338 (Comm)).”

Post-judgment Interest

The Court held that a contractual right to interest will not generally be read as depriving the judgment creditor of its right to statutory interest under the Judgments Act 1838 – see Standard Chartered Bank v Ceylon Petroleum Corp [2011] EWHC 2094 (Comm)

On the facts of the case, the Court held that any interest payable was contractual and not statutory, and as the contractual interest had not been pleaded, then nothing was payable.

However, the Court went on to consider the position in relation to delay if it had made an award of statutory interest.

The Court set out the guidance given by the Technology and Construction Court, part of the High Court, in

Claymore Services Ltd v Nautilus Properties Ltd [2007] EWHC 805 (TCC)

Where a claimant has delayed unreasonably in commencing or prosecuting proceedings, the court may exercise its discretion either to disallow interest for a period or to reduce the rate of interest.

In exercising that discretion, the court must take a realistic view of delay. In the case of business disputes, litigation is for all parties an unwelcome distraction from their proper business. It is not reasonable to expect any party to take every litigious step at the first possible moment, or to concentrate on litigation to the exclusion of all else. Delay should only be characterised as unreasonable for present purposes when, after making due allowance for the circumstances, it can be seen that the claimant has neglected or declined to pursue his claim for a significant period.

When determining what disallowance or reduction of interest should be made to mark a period of unreasonable delay, the court should bear in mind that the defendant has had the use of the money during that period of delay.

The Court was also referred to in the following passage in

Derby Resources AG v Blue Corinth Marine Co Ltd (The Athenian Harmony) (No. 2) [1998] 2 Lloyd’s Law Reports 425, 427

“If interest is withheld the defendant receives a windfall. He has free use of funds which, if he had performed his obligation to pay, would not have been in his hands, since the English Courts have no jurisdiction to order compound interest, the defendant will enjoy the further benefit of relatively inexpensive use of funds, even if finally ordered to pay interest for the entire period from the cause of action arising until Judgment. Whereas, in a case such as Birkett v Hayes … where the claim cannot be quantified for a long period after the cause of action has arisen, and the proceedings commenced, it is not difficult to see unfairness to the defendant in requiring interest to be paid on the whole of the sum not then quantifiable, it is much harder to detect any unfairness to a defendant left with substantial funds in his hands, and knowing perfectly well the amount of the claim during the whole of the material time, from the initial presentation of the claim. If there is no material previous to the defendant by reason of the delay, it is difficult to see why the interests of justice should normally require that when he knows that amount claimed, he should have an even larger benefit bestowed on him than he would derive from his unjustifiably refusing to pay the claim. Having regard however to the way in which Lord Justice Lawton (with whose judgment Lord Justice Eveleigh agreed, as did implicitly Lord Denning M.R.) expressed the principle, it would appear that justification for depriving the successful plaintiff of interest must be that he has caused his loss of use of the money by his own fault rather than that it would be unfair or unjust to the defendant that he should have to pay interest during the delay.

This countervailing consideration would be consistent with the compensatory function of the interest jurisdiction.

In cases where the delay and the degree of fault are so substantial that the predominant cause of the plaintiff being out of his money can be seen to be his own failure to prosecute the claim, rather than the defendant’s maintenance of his defence, it is not difficult to see the policy should be that a successful plaintiff should not be compensated for loss of use of the money. However, in order for it to be said that the plaintiff’s fault has displaced the defendant’s fault as the predominant cause of the plaintiff being kept out of his money, the delay in question would have to be very substantial and not merely relatively short periods of weeks or months, during which, in commercial litigation, lulls in activity inevitably occur and the plaintiff’s fault would have to be very substantial as where an action has inexcusably been allowed to go to sleep for years.”

COMMENT

A correct decision and a detailed, helpful and correct analysis of Section 35A of the Senior Courts Act 1981.

At the outset of any civil litigation of any kind, the solicitors for both parties should carefully check the position in relation to interest.

If acting for a claimant, check to see if there are any contractual provisions relating to interest and make sure that if there are, you plead them.

If defending, and there is a contractual provision for interest, and that is not pleaded, then you should succeed in resisting any claim for interest, and it is not necessary to plead it in the defence or draw the claimant’s attention to it until the claimant seeks it, if and when it has won the case.

PART 36: TENSION BETWEEN BEATING AN OFFER BY ANY AMOUNT, HOWEVER SMALL, AND GENUINE ATTEMPT TO SETTLE

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Reproduced from Practical Law with the permission of the publishers. For further information visit www.practicallaw.com.

There have been no fewer than three instances in under two months of the courts refusing to award a claimant the extras when the claimant had beaten its own offer, but by a small amount, with the Courts in all three cases holding that the offers were not genuine attempts to settle the proceedings, which is a factor that the court must take into account in considering whether it would be unjust to award the extras.

Two of the decisions are High Court decisions, and although each case will depend upon its facts, there is a pattern developing.

In

Sleaford Building Services Ltd v Isoplus Piping Systems Ltd [2023] EWHC 1643 (TCC)

the Technology and Construction Court, part of the High Court, held that a claimant’s offer to accept 99.9% of its claim, with the balance being interest, was not, viewed objectively, a genuine attempt to settle the proceedings.

The Court said:

“The obvious point to make here is that the offer, if accepted, required Sleaford to pay the whole of the principal amount decided by the adjudicator to be due, namely £323,502.32. That is not really much of a concession at all in circumstances where, as in this case, adjudication enforcement tends to produce an all or nothing outcome save in severance cases, which this is not. In reality, all that Isoplus was offering was to forego interest for a short period. In some cases, foregoing interest may amount to a genuine and realistic element of compromise but this is not such a case.”

This is a variation on the theme, in that here the claimant had won the case and was enforcing the decision of an Adjudicator.

Now, it seems that even where a claimant has judgment, they must make some significant concession in order to achieve the benefits of Part 36.

That does not seem right.

In

Rawbank SA v Travelex Banknotes Ltd [2020] EWHC 1619 (Ch)

the Chancery Division of the High Court accepted that a 99.7% offer was a genuine attempt to settle a very strong case where there was clearly no defence.

Here, it was not just a question of it being a very strong case; the case had already been decided in the claimant’s favour.

In

Yieldpoint Stable Value Fund, LP v Kimura Commodity Trade Finance Fund Ltd [2023] EWHC 1512 (Comm)

the Commercial Court, part of the Kings Bench Division of the High Court held that a Part 36 offer made by the claimant and beaten at trial was not a genuine attempt to settle the proceedings, within the meaning of CPR 36.17(5)(e) and that it was therefore, not unjust to disallow the normal Part 36 consequences where a claimant matches or beats its own offer.

The Court said that it was a “pay up now, accept that you are wrong” ultimatum, rather than a genuine attempt to settle.

This is the second such decision and in the last couple of months I reported the first one –

Gohil -v-Advantage Insurance Company, Birmingham County Court, 11th May 2023

as

PART 36: SEVEN PENCE DISCOUNT NOT GENUINE OFFER TO SETTLE

where a claimant who had beaten her own offer by just 7 pence was denied the extras, as set out in CPR 36.17(4)(a) to (d).

Here, the claimant had succeeded at trial in its claim for repayment of $5 million, that is around £3.9 million plus interest and argued that the judgment was more favourable than its offer of $4.9 million which represented 99% of the principal claim, which dropped to 96% after interest was taken into account.

The Court referred to the “starkly binary nature” of the claim, that is it was all or nothing, and the fact that at the time the Part 36 offer was made, the outcome was far from obvious, with witness statements still to be exchanged.

The judgment said that the case was “up for grabs to the end”.

“This was not a case where a very high claimant offer reflected a very strong prospect of the claimant succeeding at trial. The parties were diametrically and evangelically opposed in terms of their characterisation – and, I sensed, subjective understanding – of the deal they had concluded. A discount of 1% is meaningless in such context.”

The Court concluded that the Part 36 offer was not genuine, although he noted this did not reflect any impropriety or cynical manipulation by the claimant or its lawyers.

The claimant took a legal risk of the defendant accepting the Part 36 offer but did not create a meaningful chance of settling the dispute ahead of the trial and the defendant was never likely to accept the Part 36 offer.

This is a difficult area in need of clarification by way of Statutory Instrument, in advance of the massive extension of Fixed Recoverable Costs in October 2023, and the accompanying complete change in the Part 36 provisions.

Clearly there is a difference between an offer in relation to essentially special damages only, where the amount claimed is quantified and quantifiable, as compared with general damages.

Thus, if in a commercial case, a claimant seeks £1 million but makes a Part 36 offer for £999,000, one can see policy reasons for not allowing the extra enhancements set out in CPR 36.17(4)(a) to (d).

However, if the claim is in general damages, which are uncertain, and the claimant offers to accept £999,000 but at trial achieves £1 million, then the claimant would expect to receive the enhancements.

However, the Civil Procedure Rules do not distinguish between general damages and special damages in relation to Part 36.

Maybe they should.

There is also a tension between a specific cash offer and a percentage offer.

The courts have adopted different approaches in relation to percentage offers, with some courts taking the view that an offer to accept a 100%, in circumstances where the claimant then wins completely at trial, is a situation where the claimant has matched its offer and should get the enhancements.

Other courts have taken a different view.

The legislative history is interesting in that originally a claimant had to beat its own offer, rather than match it, but Parliament changed that so that a claimant only had to match its own offer.

In the case of

Carver v BAA Plc [2008] EWCA Civ 412 (22 April 2008)

not referred to in the judgment here, the Court refused to award the claimant Part 36 extras where she had only beaten her own offer by a small amount.

That decision was the subject of severe criticism and Parliament statutorily repealed it and CPR 36.17(2) provides:

“(2) For the purposes of paragraph (1), in relation to any money claim or money element of a claim, “more advantageous” means better in money terms by any amount, however small, and “at least as advantageous” shall be construed accordingly.”

That seemed to have resolved matters.

However, Parliament then inserted a fresh CPR 36.17(5)(e), a rule amendment taking effect in April 2015 which means that in considering whether it will be unjust to award the claimant the enhancements within that same subrule, the Court must consider whether the offer was a genuine attempt to settle the proceedings.

There is a clear, and unresolvable tension between those two provisions.

This is the fault of the rule, and not the courts who have the unenviable task of interpreting a rule which is inherently internally contradictory.

The Court here did go through the post-April 2015 decisions, which show different attitudes by different courts on apparently identical facts and rightly rejected any criticism of a party for making an offer and using it as a “tactical step” and pointed out that such procedural behaviour for tactical purposes is both encouraged and supported in the interest of promoting settlement of disputes.

The Court then appeared to contradict itself by saying:

“That said, an offer which is a cynical attempt to manipulate the Part 36 regime and apply pressure on an adversary is unlikely to be effective for such purposes.”

The burden of proof or persuasion under CPR 36.17(5)(e) rests upon the offeree. Proof of injustice under CPR 36.17(4) is a “formidable obstacle” to an offeree who finds themselves on the wrong side of a judgment: see Webb v. Liverpool Women’s NHS Foundation Trust [2016] EWCA Civ 365; [2016] 1 WLR 3899.

The Court here said that the Part 36 regime incentivizes the making and acceptance of constructive offers of settlement, that is those which can be said to have a meaningful impact upon the chances of avoiding a trial or “further consuming curial resources towards trial” and that cases decided under CPR 36.17(5)(e) invariably concern a “very high claimant offer”, that is an offer involving a very small or negligible discount against the gross value of the claim and/or waiver of accrued interest.

“19. The fact that a judge in another case upheld a 99.7% offer (Rawbank SA v. Travelex Banknotes Ltd. [2020] EWHC 1619 (Ch); [2020] Costs L.R. 781) or a 95% offer (Jockey Club Racecourse Ltd. v. Willmott Dixon Construction Ltd. [2016] EWHC 167 (TCC); [2016] 4 WLR 43) or a 90% offer (JMX v. Norfolk & Norwich Hospitals NHS Foundation Trust [2018] EWHC 185 (QB); [2018] 1 Costs L.R. 81) does not inform, still less dictate, how I should approach my evaluation of the Part 36 Offer in the present case. These decided cases provide illustrative guidance, no more.

With effect from 1 October 2023, in cases covered by Fixed Recoverable Costs, that is virtually all civil litigation valued at  £100,000 or less, there will be no order for indemnity costs when a Part 36 offer is matched or beaten, but rather a straight 35% uplift on costs.

Given that we are now into percentages, and given the tension set out above, it is now worth considering a graded incentive/penalty structure?

For example, on a quantum offer, if a claimant beats it by, say, under 5%, maybe the uplift on costs should be only 10% and 2% on damages.

If the claimant beats its offer by between 5% and 10% then those figures could be doubled etc.

This would encourage claimants to make more acceptable offers, as the more they beat their offer by, the greater the enhancements. Likewise, there will be little benefit in making an offer that concedes almost nothing, as the enhancements would be almost nothing.

Of course, no claimant is forced to make any offer at all, and therefore, is not being forced to jettison a significant part of its claim.

90% LIABILITY PART 36 OFFER VALID: MUNDY CASE DISTINGUISHED

In

Chapman v Mid and South Essex NHS Foundation Trust (Re Costs) [2023] EWHC 1871 (KB) (20 July 2023)

the King’s Bench Division of the High Court held that a claimant’s offer to accept 90% of damages in a clinical negligence case where there was a subsequent liability trial, but not yet a quantum trial, was a valid Part 36 offer.

Here the offer was made on 22 December 2022 and the judgment on liability was handed down on 30 May 2023.

The offer was described in the letter from the claimant’s solicitors as

 “an offer to settle the liability and causation issues in this action for 90% of damages assessed on a 100% liability basis, that is with a deduction of 10% from the full value of the claim”.

The claimant won on a 100% basis and so obtained a judgment “at least as advantageous” to her as a Part 36 offer.

The High Court held that if it was a valid offer, then it would not be unjust to make those orders referred to in CPR 36.17(3) and (4) that are applicable at this stage, where no quantum trial has taken place, and therefore, no determination of damages to be awarded to the claimant has occurred.

Clearly the items in CPR 36.17(4)(a) and (d) relating to enhanced interest on damages and an uplift on damages respectively did not apply, but the provisions relating to indemnity costs and enhanced interest on those costs did apply.

So far, so good.

The potential problem was the heavily criticised decision in

Mundy -v- TUI UK Ltd [2023] EWHC 385 (CH)

Technically distinguishing that decision, the High Court here effectively rejected it.

Here is the relevant, and important, part of the judgment in this case.

“28. However, the factual context of Mundy is important. This was that the Claimant had made two separate Part 36 offers (one based on a 90/10 liability split and one to accept £20,000 pounds in settlement of the claim) and the Defendant had made a Part 36 offer of £4000 in full settlement. The Claimant was ultimately awarded £3,805.60 but nevertheless argued that the judgment was at least as advantageous to him as the proposals in his 90/10 offer: [1] and [6]-[8]. At [32], Collins Rice J identified a “particular difficulty” with the Claimant’s position, namely that it seemed to:

“…cut across the binary structure of CPR 36.17(1) by contemplating a situation in which the answer to both limbs could be “yes”: A claimant can have failed to beat a defendant’s money offer, but still have beaten or equalled his own liability offer. That raises the problematic prospect of subsections (3) and (4) both applying in circumstances where it is far from obvious that this is in the contemplation of the rule at all”.

29. While Collins Rice J did discuss 90/10 liability offers in general terms at [36]-[42], I do not understand her judgment as purporting to hold that Part 36 consequences cannot flow from such offers made in different factual circumstances from those before her, and any such finding would be obiter in any event. Collins Rice J’s analysis was based on the difficulty of comparing monetary offers with liability offers of this kind. While such a difficulty may arise in claims such as Mundy where liability and quantum issues are tried together and both liability and monetary offers have been made, the analysis does not apply in this case given that a split liability trial had been ordered and the only substantive offer made by either party was the Claimant’s 90/10 liability split offer.

30. Further, in Mundy at [36], Collins Rice J appeared to acknowledge that a 90/10 liability offer could be effective in cases where there was a “genuine question of issues-based liability”. There was, until judgment, a genuine prospect of a finding on split liability as between the parties in this case. I did not find that the contributory negligence argument in relation to the Dr Bopitiya claim was one that did not have “the slightest prospect of success” as in Mundy at [11]. Although Mr Post now advances that contention, the Defendant had maintained this allegation at trial and my rejection of it was based on my decision as to the point at which the Claimant would have undergone surgery but for Dr Bopitiya’s negligence, all matters that were heavily contested by the Defendant at trial.

31.In any event, Mundy is distinguishable from this case because the manner in which the Claimant’s 90/10 offer applied to the causation issue had been made clear in correspondence and was reflected in the liability judgment.

32. For these reasons I do not accept that the reasoning in Mundy is applicable here. In my judgment the Claimant’s 22 December 2022 offer was a valid one for Part 36 purposes.

COMMENT

A welcome, correct and sensible judgment.

It still leaves open the issue of how to split liability and quantum costs.

Even where there is a liability trial, there is inevitably work done on quantum and the successful Part 36 offeror appears to get the benefit of indemnity costs on all the work done after the expiry of the period for accepting the Part 36 offer.

It is hard to see how any other method would work, without a huge amount of work on splitting the bill into quantum and liability work.

I predicted that the flawed decision in Mundy would be thrown in the faces of claimant by defendants.

It was here.

I set out my writeup of the distinguished- that is it has been distinguished by another court, not that it was a distinguished judgment- which appeared at 819 of the Newsletter in Issue 150 here.

PART 36 AND LIABILITY: JUST HOW WRONG CAN THE HIGH COURT BE?

In

Mundy -v- TUI UK Ltd [2023] EWHC 385 (CH)

the Chancery Division of the High Court, on appeal from Swindon County Court, got the law on Part 36 offers and liability just about as wrong as is possible.

The decision is so hopelessly flawed and in conflict with numerous Court of Appeal decisions, that it is per incuriam – that is wrongly decided – and can be ignored, and indeed is being ignored, by other courts.

However, successful claimants will now have this decision thrown in their faces by losing defendants, so it is necessary to deal with it.

The County Court and the High Court arrived at the right conclusion, that is on the facts here that the claimant should not get the CPR 36.17 enhancements, but for the wrong reasons, and it is those wrong reasons which are likely to cause problems in other liability offer cases under Part 36.

It was said that there was no previous High Court authority on the point, which is nonsense.

The claimant brought a holiday sickness claim against the defendant holiday company and made two Part 36 offers on the same day:

1) £20,000 inclusive of interest and special damages;

2) liability on a 90% / 10% basis in his favour.

The defendant made a Part 36 offer of £4,000.

None of the offers was accepted and the matter went to trial, and the claimant won on a 100% liability basis, but only recovered £3,805.60.

Thus, the claimant had beaten its own liability offer, but had recovered less than 20% of its own quantum offer and had failed to beat the defendant’s quantum offer.

The claimant submitted that as it had beaten its liability offer, it should get the Part 36 enhancements.

Here, the defendant had pleaded contributory negligence, and therefore, whatever the position in matters generally, it was obviously entirely reasonable and sensible for the claimant to make a liability offer, accepting a degree of clinical negligence.

The Court, bizarrely, said that the defendant’s plea of contributory negligence was “a hopeless idea” and that

“… no competent legal adviser could have regarded the contributory negligence plea as having the slightest chance of success.”

It, therefore, held that the Claimant’s offer was not a genuine offer to settle, but “a plainly tactical device, to take advantage of a foolish piece of pleading”.

That is one of the most bizarre statements by a court in English legal history.

A claimant sues. The defendant argues contributory negligence. The claimant accepts a degree of contributory negligence.

However, the court, talk about descending into the arena, rejects the whole concept of contributory negligence.

Furthermore, having stated that the defendant’s pleading of contributory negligence was foolish, it then punishes the claimant for making a Part 36 offer on liability, and beating it.

The whole judgment makes Alice in Wonderful look rational.

Thus, the Court treated the offer as for 90% of the quantum claim, and the claimant had failed to recover 90% of the £20,000 that he had offered by way of a quantum settlement.

Thus, the claimant had not beaten his own offer.

In fact, the claimant had achieved at Court, more than 90% of the amount offered by the defendant.

The matter becomes somewhat complicated in that if the claimant was held to have beaten his own 90% offer, and was entitled to the enhancements, including a 10% uplift on damages, then he would have beaten the defendant’s quantum offer as well.

So there are two separate issues.

Many of the cases involve a claimant making a quantum offer which equates to 95%, 99%, or whatever, of the total claim and these are not liability offers.

In these cases, the issue has been whether such an offer, giving very little discount, is a genuine offer to settle.

I have dealt with this extensively in

PART 36: 2023 SPECIALS – PART 12 – GENUINE OFFER TO SETTLE

However, there are very many cases on the issue of liability alone.

A claimant used to have to beat its own offer to succeed, but following a change in the law by Parliament, now only has to match its own offer.

Before that change, courts had held that where an offer of 100% liability had been made, and the claimant had won, that that counted as a win for Part 36 purposes, as the claimant could not have done any better.

In other cases, a claimant who had made a liability offer and won the first part of a split trial was refused any extras by the court at that point, because it was unaware whether the defendant had made a quantum offer, which the claimant may then fail to beat at the quantum hearing.

That is, of course, what happened here, albeit not after a split trial.

Clearly there is a tension between offers where both parties win, that is a claimant beats its own Part 36 liability offer, but fails to beat a defendant’s quantum offer, which is the position in this case.

In those circumstances, it is a matter of judgment for the court, and for it to exercise its discretion under CPR 36 .17(4) to decide whether it is unjust to award the enhancements.

This will happen in other scenarios.

A claimant may make a Part 36 offer in relation to special damages, and beat it, but fail to beat a defendant’s overall quantum offer.

It is strongly arguable that the claimant should get enhancements in relation to special damages, as all of that work would have been saved had the special damages offer been accepted.

Any other outcome is absurd.

A claimant could make a very reasonable offer on special damages, which would have saved, say 50 hours work but fails to beat the defendant’s overall quantum offer.

Not only does the claimant risk not getting the enhancements but has to pay the defendant’s costs from the date of the expiry of the defendant’s offer, including for those 50 hours work on special damages, which was entirely unnecessary.

Of course, it can work the other way round; a defendant makes a perfectly good offer on special damages which the claimant fails to accept, then the claimant beats its overall offer on damages, and gets indemnity costs for all the unnecessary work in relation to special damages.

If Parliament, and the Civil Procedure Rules Committee, had intended that, then the rule can be simple:

“An offer can only be for quantum, and only for the whole of the case, and any issues within the case cannot be dealt with by way of a Part 36 offer”.

In fact, all the rules, and the whole tenor of Part 36, is exactly the opposite.

Consequently, it is most definitely not all or nothing, and there can indeed be different winners of different stages of the litigation.

This should not come as any surprise to anyone, as throughout protracted litigation, it is common for the eventual winner to nevertheless lose, and have costs orders made against it, in relation to certain interlocutory matters.

A claimant who has failed to beat a defendant’s quantum offer, but has beaten its own liability offer, should certainly not be the sole winner.

One option is to award the claimant the enhancements of indemnity costs and enhanced interest thereon, between expiry of its liability offer, and the defendant’s unbeaten quantum offer if made later.

If the defendant’s unbeaten quantum offer comes first, then there is no reason why the claimant should get any enhancement as it could have resolved the whole matter by acceptance of that offer and without the need to carry on and make a liability offer.

For a court to hold that a liability offer cannot be made, is plain wrong.

The law is clear, both in Part 36 itself, and in previous decisions.

CPR 36.2(3) states that a Part 36 offer may be made in respect of the whole, or part of, or any issue that arises in a claim, counterclaim or other additional claim or an appeal or cross-appeal from a decision made at a trial.

That is all encompassing.

CPR 36.3(c) defines a trial as meaning:

“any trial in a case whether it is a trial of all issues or a trial of liability, quantum or some other issue in the case” (my bold).

Thus, liability is specifically stated in CPR 36 to be an issue, which very obviously it is, and as we have seen, CPR 36.2(3) provides that a Part 36 offer may be made in respect of any issue.

Furthermore, what is the point of defining a trial as including a liability trial if an offer on liability cannot be made?

A claimant offer a 50 – 50 liability settlement.

That is not accepted by the defendant and the matter goes to a liability trial and the court finds in favour of the claimant on a 75% / 25% basis.

If the Part 36 offer cannot be made, does the defendant then get the costs of that liability trial for having established 25% contributory negligence, even though the claimant had offered 50%?

On the reasoning in this case, the answer is yes, and that is mad.

CPR 36.5(4) states:

“(4) A Part 36 offer which offers to pay or offers to accept a sum of money …”

That clearly envisage non-monetary offers, e.g. on liability.

CPR 36.12 reads:

“Acceptance of a Part 36 offer in a split-trial case

36.12

(1) This rule applies in any case where there has been a trial but the case has not been decided within the meaning of rule 36.3.

(2) Any Part 36 offer which relates only to parts of the claim or issues that have already been decided can no longer be accepted.

(3) Subject to paragraph (2) and unless the parties agree, any other Part 36 offer cannot be accepted earlier than 7 clear days after judgment is given or handed down in such trial.”

What else can this possibly refer to except a liability offer, with the issue of liability having been decided?

Maybe I have missed something. Are courts now routinely hearing quantum trials before liability trials in split-trial cases?

I do not think so.

Suppose a claimant makes a 50% liability offer at the outset and the defendant makes no offer, and the claimant wins at trial.

Why should that claimant not get the enhancements when it was prepared to jettison half of the claim in order to settle it?

Had the claimant offered a quantum settlement of 99%, it would get the extras, but offering a 50% liability concession does not get the claimant those extras.

Again, it is irrational and very clearly not what Parliament intended, nor what the Civil Procedure Rules say.

How does it operate in a claim where there is no monetary offer?

Part 36 specifically recognizes that there can be Part 36 offers in such cases, as CPR 36.17 (4)(d)(ii) specifically provides that the 10% uplift in such cases shall be on costs, there being no damages to uplift.

I completely recognize that this is a difficult rule, but it is also the most important rule, by a million miles of the Civil Procedure Rules.

The legal profession and the population of England and Wales deserve better than this.

MCR PATHWAYS: VOLUNTEER MENTORS REQUIRED

I set out below a piece from MCR Pathways, which is self-explanatory.

I personally have met with Peter Hopkins of MCR Pathways, and at Hemel Hempstead Town Football Club, where I am Vice-Chair, we are working with them and encouraging players to act as volunteer mentors, as well as others involved in the club.

Hemel Hempstead Town Football Club also work in partnership with the Samaritans and Mind.

Mental health issues in their broadest sense are very common, but also little talked about.

MCR Pathways do fantastic work, and if you want any more information then please contact Peter Hopkins as per the details in the piece, or contact me on kerry.underwood@lawabroad.co.uk.

LITIGATION FUNDING AGREEMENTS SUBJECT TO DAMAGES-BASED AGREEMENT REGULATIONS: SUPREME COURT DECISION

Fixed Recoverable Costs Extension: Autumn Course Details

Details of the courses are here, and can be booked here.

In

R (on the application of PACCAR Inc) v Competition Appeal Tribunal [2023] UKSC 28 (26 July 2023) 

the Supreme Court held that litigation funding agreements where the funder plays no part in the litigation and is paid by a percentage of any damages received are damages-based agreements and thus unenforceable unless the very considerable formalities of the Damages-Based Agreements Regulations 2013 have been complied with.

Here, two claimants applied to bring collective agreements in relation to Competition Law breaches against DAF and other truck manufacturers and those defendants argued that the litigation funding agreements were damages-based agreements within the meaning of Section 58AA of the Courts and Legal Services Act 1990.

That argument was rejected by the Competition Appeal Tribunal and the Divisional Court, and the matter was leap-frogged to the Supreme Court which held that claims management services within Section 58AA (3) of the Courts and Legal Services Act 1990, Section 4(2) of the Competition Act 2006 and Section 419A of the Financial Services and Markets Act 2000 included services provided under litigation funding agreements.

Claims management services specifically include “provision of financial services or assistance”.

This meant that the litigation funding agreements here were damages-based agreements and as they did not comply with the formalities and requirements set out in the Damages-Based Agreements Regulations 2013 were unlawful and unenforceable.

The decision in the Supreme Court was by a 4-1 majority, with the dissenting Justice holding that the provision of financial assistance is included in the term “claims management services” only if it is given by someone who is providing claims management services within the ordinary meaning of that term.

It is thought that this decision makes most litigation funding agreements in all types of litigation unenforceable as being non-compliant with the Regulations.

Although the decision affects all litigation, it is of particular significance in the Competition Appeal Tribunal itself as it is a requirement there that before a collective action can be certified, there must be adequate funding in place.

It also prevents the use of such litigation funding agreements completely for opt-out collective proceedings in the Competition Appeal Tribunal, as Section 47C (8) of the Competition Act 1998 provides that a damages-based agreement is unenforceable if it relates to opt-out proceedings.

COMMENT

Damages-based agreements are largely useless due to the hopeless regulations and restrictions imposed by the Damages-Based Agreements Regulations 2013.

Whether one agrees with the concept of litigation funding or not, is a different issue, and if it is to be banned then it should be banned, but if it is to be allowed, then it should not be blocked by technicalities as here.

The annoying thing is that anyone who has knowledge of damages-based agreements has known the defects for a very long time and has called for change.

I called them “Don’t touch with a Barge-Pole Agreements” and Professor Dominic Regan improved on that greatly with his “Don’t Bother Agreements”.

Lord Neuberger, then President of the Supreme Court, quoted me as saying that they were almost entirely pointless and would not be used and Delphically said that others may disagree.

“34. DBAs will, I hope, not succumb in practice to the problems which bedevilled 1999 CFAs. More importantly I hope that they prove a spur to innovation; innovation which sees both solicitors’, and counsels’, fees set according to something other than the traditional hourly billing model. There may well be some practical resistance to this. Some have already argued that there is little incentive for solicitors to act on DBAs in circumstances where they could act on a CFA. Kerry Underwood has expressed that opinion in this way,

‘In personal injury cases contingency fees are almost entirely pointless from a solicitor’s point of view as they are subject to all of the restrictions that apply in relation to conditional fee agreements AND the solicitor has to allow a pound for pound reduction in relation to any costs received from the losing party, something that does NOT apply in relation to the conditional fee success fee23.’

35. It is an interesting opinion. But it might seem to neglect the client’s point of view in a new legal market place. It may be that it would be unattractive from a solicitor’s perspective to offer a DBA, rather than a CFA, in a personal injury case. But what one solicitor finds pointless may represent another solicitor’s competitive advantage. Given the choice between a solicitor who only offers CFAs and one who offers CFAs and DBAs at more advantageous prices, and perhaps with normal costs calculated by way of fixed fee rather than hourly billing, clients cab reasonably be expected to appreciate where their interests lie. In other words, the brave new world of DBAs may well help to encourage a more genuinely competitive market place, in which solicitors are having to become ever more client – or consumer – focused.”

In  2015, the DBA Reform Project’s Drafting and Policy Issues included a chapter (10) titled ‘Excluding Third Party Funders’ Litigation Funding Agreements from the Ambit of the DBA Regulations’, in which the issue was set out as follows:

 ‘It was argued in some quarters that LFAs were inadvertently caught up by the 2013 DBA Regulations (although, as a matter of statutory drafting and interpretation, it is very strongly arguable that the Regulations do not cover LFAs).

However, for the removal of any slight prospect of satellite litigation on this point, however vainly pursued, the Ministry of Justice has conveyed the view to the working group that LFAs should be expressly omitted from the scope of the 2015 DBA Regulations.’

The proposed DBA Regulations 2019, prepared by Nicholas Bacon KC and Professor Rachel Mulheronwhich, also reiterated the MoJ’s view that LFAs should be expressly excluded.

If outside companies still have the appetite to invest in litigation funding – a big assumption due to the availability of much higher interest rates now – correct drafting of  litigation funding agreements is not the only issue that they face.

The finding that whatever the wording of the litigation funding agreement, the funder is supplying claims management services is unlikely to be one that funders find attractive.

Much of this stems from the decision to allow litigation funders to self-regulate on a voluntary basis with no enforceable code of conduct.

That was never going to work in such an important and contentious area, and these matters were always going to end up in court.

There is also the issue, unexplored here, of whether such agreements fall foul of the still existing rules, now civil rather than criminal, against champerty and maintenance.

Another potentially significant issue, is whether claimants represented under such agreements, now held to be illegal and unenforceable, can bring proceedings to get their money back, either under the general law of contact, or under the Solicitors Act 1974, depending upon the retainer between those clients and their solicitor.

The answer appears to be yes.

The whole issue of how litigation is to be funded needs to be looked at and a decision made on principles rather than technicalities.

The Damages-Based Agreements Regulation need tearing up with Section 57 of the Solicitors Act 1974 extended to contentious business.

In other words, allow out and out contingency fee agreements in litigation matters.

The full judgment runs to 98 pages and is here.

The Supreme Court’s own press summary is set out below and the link is here.

The judgment summary, different from the press summary, can be watched here.

Paragraph 90 of the judgment is interesting:

“Even if it might be said that it is desirable in public policy terms that third party funding arrangements of the kind in issue in this case should be available to support claimants to have access to justice (as to which I express no view), this is not a reason why there should be any departure from the conventional approach to statutory interpretation.”

That is hardly a ringing endorsement by the Supreme Court of the concept of litigation funding. That was the lead judgment with three others of the Supreme Court Justices not adding to it, but agreeing with it, and with the fifth Supreme Court Justice delivering a long and detailed dissenting judgment.

PRESS SUMMARY ISSUED BY THE SUPREME COURT

R (on the application of PACCAR Inc and others) (Appellants) v Competition Appeal Tribunal and others (Respondents)
[2023] UKSC 28

Date: 26 July 2023

Justices

Lord Reed (President), Lord Sales, Lord Leggatt, Lord Stephens and Lady Rose

Background to the Appeal

This appeal is concerned with a matter of statutory interpretation in the context of litigation funding. Litigation funding involves the agreement of a third party (with no prior connection to the litigation) to finance all or part of the legal costs of certain litigation, in return for a percentage of any damages recovered should the funded litigant be successful. In particular, this appeal concerns whether each of the agreements to provide this funding, known as litigation funding agreements (“LFAs”), constitute a “damages-based agreement” (“DBA”), a term given a specific definition by statute. In order to be lawful and enforceable a DBA has to satisfy certain conditions. The LFAs have been entered into without satisfying those conditions, so the question whether they constitute DBAs is critical for their enforceability.

The issue arises in the context of applications to bring collective proceedings for breaches of competition law. The second respondent (“UKTC”) and the third respondent (“RHA”) each sought an order from the Competition Appeal Tribunal (the “Tribunal”) to enable them to bring collective proceedings on behalf of persons who acquired trucks from the appellants (collectively, “DAF”) and other truck manufacturers. The proposed proceedings take the form of “follow-on” proceedings in which compensation is sought for the alleged higher prices paid for trucks as a result of the breach of European competition law, as found in the infringement decision of the European Commission dated 16 July 2016. To obtain a collective proceedings order from the Tribunal, UKTC and RHA needed to show that they had adequate funding arrangements in place to meet their own costs and any adverse costs order made against them should they lose. Both UKTC and RHA relied on the LFAs in an effort to meet these requirements.

Section 154 of the Coroners and Justice Act 2009 (“CJA 2009”) inserted section 58AA into the Courts and Legal Services Act 1990 (“CLSA 1990”). Section 58AA(1) and (2) provide that a DBA will be unenforceable unless certain conditions are complied with. Shortly after the insertion of section 58AA, the Damages Based Regulations 2013 (the “DBA Regulations 2013”) came into force. These set out further requirements which must be satisfied if a DBA is to be enforceable. It is accepted that the LFAs in this appeal would not satisfy these conditions.

The relevant part of the definition of DBA in this appeal, pursuant to section 58AA(3), is whether the LFAs involve the provision of “claims management services”. This phrase is defined, under section 58AA(7), by reference to earlier legislation, being the Compensation Act 2006 (“CA 2006”) until 1 April 2019 and the Financial Services and Markets Act 2000 (“FSMA 2000”) thereafter. These refer to regulated “claims management services”. Such a service is regulated only if prescribed by the Secretary of State or specified in an order made by the Treasury. “Claims management services” are defined in the CA 2006 and FSMA 2000 in materially the same terms. Under section 4(2)(b) of the former, such services are “advice or other services in relation to the making of a claim” and “other services” includes, in particular, a reference to “the provision of financial services or assistance”.

The Tribunal held that the LFAs did not involve the provision of “claims management services”. As a result, they were not DBAs and were not therefore rendered unenforceable by virtue of section 58AA(2). The Divisional Court dismissed the appeal. The appellants appeal under the leap-frog procedure directly to the Supreme Court.

Judgment

The Supreme Court allows the appeal by a majority. Lord Sales gives the leading judgment, with which Lord Reed, Lord Leggatt and Lord Stephens agree. Lady Rose gives a dissenting judgment.

Reasons for the Judgment

An important feature of this appeal is that the definition of DBA, derived from one legislative context (the CA 2006), has been used in a different legislative context (section 58AA of the CLSA 1990). The meaning of the definition has not changed. The meaning has to be determined with reference to the CA 2006.

In relation to the wording of section 4 of the CA 2006, the Court held that the words “claims management services” read according to their natural meaning were capable of covering the LFAs [50]. In relation to the statutory purpose, the Court held that Part 2 of the CA 2006 was intended to provide a broad power to allow the Secretary of State to decide what targeted regulatory response might be required from time to time as information emerged about what was then a new and developing field of services seeking to encourage or facilitate litigation, where the business structures were opaque and poorly understood at the time of enactment. The wide language used in section 4 [63]-[65], and the degree of parliamentary control for the future exercise of the section 4 power, which is a feature of the scheme of Part 2 [60], [62], were strong indicators of this. Viewed in this light, there was good reason to think that Parliament used wide language in section 4 deliberately and with the intention that the words of the definition should be given their natural meaning [72].

The DBA Regulations 2013 are not a permissible aid to interpreting “claims management services”, as defined in the CA 2006. They were not introduced broadly contemporaneously in combination with the CA 2006 as part of a single coherent scheme, nor were they subject to review by the same Parliament which enacted the 2006 Act [47]. By contrast, the Compensation (Regulated Claims Management Services) Order 2006 (the “Scope Order”) was broadly contemporaneous and formed part of the same legislative scheme as, and so is a legitimate aid to interpretation of, the CA 2006; as is the Explanatory Memorandum which accompanied the Scope Order [46]. The Scope Order and the Explanatory Memorandum support the interpretation of the definition of DBA for which the appellants contend [61], [73].

The respondents relied on the wording of the defined term itself – “claims management services” – to submit that the definition should be limited to services in the context of the management of a claim. This notion was referred to as “the potency of the term defined”. The Court held that this notion was not relevant to the appeal for three reasons. First, the terms explicitly used in the definition in the primary legislation and also in the Scope Order cannot be read as involving the management of claims, nor as having claims management as a unifying core of meaning [78]. Second, “claims management services” had no established and generally accepted meaning which could lead a reader of the text of section 4 to suppose that the express language of the definition was to be treated as qualified or coloured by that meaning [79]. Third, to read the definition in section 4 in this way would be counter to the scheme and purpose of the CA 2006 [83].

The Court also held that the interpretation of section 4 of the CA 2006 as covering the LFAs in this case did not produce any absurdity in relation to section 58B, which section 28 of the Access to Justice Act 1999 inserted into the CLSA 1990 but which had not been brought into force, to make enforceable certain other forms of LFAs which were otherwise thought to be unenforceable [84]. Further, the Court held that events subsequent to 2006 were not relevant to the interpretation of section 58AA [90], [94].

Lady Rose dissents and would dismiss the appeal. She agrees with the Divisional Court and the Tribunal that the provision of financial assistance is only included in the term “claims management services” if it is given by someone who is providing claims management services within the ordinary meaning of that term [154]. Lady Rose holds that the fact that litigation funding would not naturally fall within the scope of the term “claims management services” is important [111]. This points to the fact that claims management services include providing financial assistance, but that this does not mean that all financial assistance constitutes “claims management services” whenever it relates to a claim [115]-[122].

References in square brackets are to paragraphs in the judgment

JG SOLICITORS COMPLAINTS MODEL: COURT OF APPEAL ENDS IT

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In

Menzies v Oakwood Solicitors Ltd [2023] EWCA Civ 844 (14 July 2023)

the Court of Appeal, in a decision of the utmost importance, has held that the deduction of costs from damages by the solicitors in personal injury cases amounted to payment, thus, triggering the Solicitors Act 1974-time limits, if the client had authorized in the retainer such deduction, even though it was incapable of quantification at that point.

It kills off the JG Green Solicitors Limited revived business model making a complaint to the Legal Ombudsman about such deductions.

It unifies the one-year time limit in the sense that it is an absolute time limit under the Solicitors Act 1974 for challenging a paid bill, and it is the time limit, albeit not absolute, for making a complaint to the Legal Ombudsman.

However, if the Legal Ombudsman upheld a complaint made more than one year after the bill was paid, that would appear to be a clear contempt of Parliament, as well as being subject to what would undoubtedly be successful judicial review proceedings.

The issue in these cases was whether deduction amounted to payment within the Solicitors Act 1974.

Virtually, all these cases are conducted under Conditional Fee Agreements and virtually all such agreements specifically authorise the solicitors to deduct their fees from the compensation received for the claimant.

In every case that I have seen brought by JG Solicitors Limited – and that is a large number – the deduction was more than one year old.

This is because clients with a genuine complaint will complain to their solicitors direct, or go to another firm of their own volition, without waiting to be stirred up by JG Solicitors Limited.

Here, the client had suffered serious injuries in Road Traffic Accident and Oakwoods secured a settlement in March 2019, with which the client was happy.

The solicitors said that they would take 25% of the damages as costs, pending costs negotiations with the insurers for the defendant.

The client was paid in July 2019 and took no action for nearly two years.

The Costs Judge held that the application for assessment of costs under the Solicitors Act 1974 was time-barred, the bill having been paid more than one year earlier.

On appeal, the High Court upheld the client’s application for detailed assessment on the ground that there had been no “settlement of account”, a meaningless phrase which does not appear in the Solicitors Act 1974.

The Court of Appeal held that payment of a solicitor’s bill was no different to paying any other bill.

“The delivery of a compliant bill will give the client the necessary knowledge. The requirement of consent does not, in our view, require that consent be given after the delivery of the bill, if the client has already validly authorised the solicitor to recoup his fees by deduction from funds in his hands.”

Section 70 of the Solicitors Act 1974, barely changed from the Solicitors Act 1843 as pointed out here and in

Belsner v CAM Legal Services Ltd [2022] EWCA Civ 1387

by the Master of the Rolls, entitles a client to apply to the Court for an assessment of a solicitor’s bill, but Section 70(4) provides that the power to order assessment is not

“exercisable on an application made by the party chargeable with the bill after the expiration of 12 months from the payment of the bill”.

As the Court of Appeal stated, the question raised in this appeal is what amounts to payment of the bill.

That question arises in the context of a Conditional Fee Agreement agreed in writing on 17 December 2015 between the Client and the Solicitors some years before settlement of the Client’s claim.

The Conditional Fee Agreement included terms by which the Client agreed in advance to the deduction of the Solicitors’ fees.

When the claim was settled in 2019, the Solicitors deducted the fees shown in their final statutory bill from the settlement monies they held in their client account, before sending the balance to the Client.

The Solicitors contend that that deduction constituted “payment” for the purposes of the provisions in Section 70 restricting the time within which there can be a court assessment of their bill.

Accordingly, they say that the Client was barred by Section 70(4), when he started proceedings in 2021, from seeking an assessment of the Solicitors’ bill.

The Court of Appeal held that no case provided any authority for the High Court’s finding that there must be a settlement of account, a phrase which has no place in the Solicitors Act 1974, or any other legislation.

The decision of the High Court was based on a fictitious requirement which was neither part of statute law nor case law, although the phrase had been used by the courts where the retainer did not give permission for the deduction.

“Payment” in Section 70 of the Solicitors Act 1974 is to be construed as including the deduction of fees payable under a statutory bill with the knowledge and consent of the paying client.

This was a Capped Conditional Fee Agreement, that is the total charges to the client were capped, including a shortfall between solicitor and own client costs and costs recovered from the other side, as well as the success fee which is chargeable only to the client in post 31 March 2013 Conditional Fee Agreements.

It is only the success fee which is capped by law.

That is obvious, as in non-Conditional Fee cases, solicitors charge when the client loses, so a damages-based cap in Conditional Fee cases can only apply to the success fee and not the shortfall between solicitors and own client costs and recovered costs.

Obviously in a non-Conditional Fee Agreement case which is lost, there is no recovery from the other side and the client pays the whole sum irrespective of the fact that no damages were recovered.

That point is lost on many courts and indeed on the Solicitors Regulation Authority, but happily not the Court of Appeal.

The overall cap is most certainly not limited to 25%. Only the success fee is so limited.

The relevant parts of the Conditional Fee Agreement here read:

“You will pay the balance of our basic charges and our success fee out of your compensation.”

“Out of the money, you agree to let us take the balance of the basic charges; success fee; insurance premium; our remaining disbursements; and VAT.”

The next section of the Conditional Fee Agreement, entirely accurate, was quoted here by The Court of Appeal:

“1.6 Whilst there is no maximum limit in relation to our Basic Charges, to give you certainty as to the maximum amount that you can be charged, we agree with you that, if you win, we will limit the total amount we will charge you for Basic Charges, Success Fee and Disbursements to a maximum of 25% of all the compensation you receive after deducting any fees and expenses recovered from your opponent. This does not include any insurance premium for any policy that you choose to take out which has to be paid in addition. The amount payable in respect of any Success Fee shall never exceed 25% of the amount of your damages as set out below. [Emphasis added].”

Solicitors Regulation Authority please take note!

Bizarrely, in his evidence, the claimant said that he took no action at the time as he was confused by the fact that the solicitors had not in fact taken 25% of damages, but rather less.

Had I been acting for the solicitors, I would have advised them to send a supplementary bill topping it up to 25% to clear up the client’s confusion.

“17. The rubric at the end of the bill itself stated that “unless otherwise stated in the covering letter, the total charge has been deducted from your damages, as agreed. It then repeated the information about the complaints process and assessment by the court. In accordance with the calculations in the bill, a balance of £22,629.09 was paid out to the Client on 11 July 2019. The Client took no further action at the time. In his evidence, he explained his state of mind at the time:

I was confused as to why this additional payment [had] been made to me. I was told at the start of my claim that the agreement with [the Solicitors] meant that they could take 25% of my compensation. My understanding of this agreement was confirmed at the end of the claim by Paul [Shemwell] in an email when my damages were agreed.

The Client said that he did not question the bill at the time that he had just placed his trust in the Solicitors “that they had worked out the payments that were due to be paid to me appropriately”. The Client ultimately challenged the bill on 1 April 2021, nearly 2 years later.”

“19. Section 69(2) requires the bill to be signed in accordance with section 69(2A) and delivered in accordance with section 69(2C). A compliant bill must be reasonably complete and that it must contain a sufficient narrative of the work for which the fee is being charged. In Karatysz, Sir Geoffrey Vos MR said at [46]:

Properly drawn bills ought in future to state the agreed charges and/or the amounts that the solicitors are intending by the bill to charge, together with their disbursements. They should make clear what parts of those charges are claimed by way of base costs, success fee (if any), and disbursements. The bill ought also to state clearly (i) what sums have been paid, by whom, when and in what way (i.e. by direct payment or by deduction), (ii) what sum the solicitor claims to be outstanding, and (iii) what sum the solicitor is demanding that the client (or a third party) is required to pay.

20. Delivery of a compliant bill will therefore inform the client of how much the solicitor is charging, and what they are charging for, so that the client knows their asserted liability.”

“22. It was common ground that the structure of section 70 is such that the client has a series of rights to an assessment, ranging from the absolute right under section 70(1), a qualified right under section 70(2), and a right exercisable only in special circumstances under section 70(3), to no right if the conditions in section 70(4) are satisfied. Accordingly, if the bill was paid (within the meaning of section 70(4)) before 1 April 2020 (i.e. one year before these proceedings were issued), then the court’s power to assess the bill was precluded by section 70(4). So, the question before this court is whether the bill was paid before that date.”

“Other requirements in relation to statutory bills

25. The right to an assessment under section 70 is to an assessment of a solicitor’s “bill”. It was common ground that the reference to a “bill” is to a bill that complies with the requirements of section 69 of the 1974 Act. It was also common ground that the bill in this case was a compliant bill. We should mention at this point that it is not a statutory requirement that a bill should inform the client of their right to an assessment. In Richard Slade and Company plc v. Erlam [2022] EWHC 325 (QB), [2022] Costs LR 489, HHJ Gosnell, sitting as a judge of the High Court, said:

25. … When dealing with a client’s right to seek an assessment of costs from his or her solicitors the Act seeks to strike a balance between allowing a reasonable time for a client to question the quantum of costs whilst protecting solicitors from having to deal with stale allegations of overcharging. Whilst the Act purports to regulate those rights it does not go so far as to oblige the solicitor to advise the client of these provisions in terms, nor to explain in plain English what the actual consequences of the application of those terms are for the client. I am personally sympathetic to the argument that it probably should.

26. Both counsel advised me that there are no regulations either connected with the [1974 Act] or Code of Conduct, arising from their obligations as a solicitor, which would oblige solicitors to explain to clients that the effect of the service of an interim statute bill (properly authorised by the retainer) would be to start the clock running for a potential [1974 Act] assessment and that there are different time limits depending on the circumstances.”

“The relevant authorities

28. The right to an assessment of costs applies both to contentious and to non-contentious business. The meaning of “payment of the bill” must be the same for both types of business. It is important, therefore, not to set too much store by considerations that apply only to contentious business, let alone those which are unique to CFAs.

29. It is well-settled, and not disputed, that payment may, in certain circumstances, be made to solicitors where they retain monies out of a fund received on their client’s behalf. It will not be payment if the solicitors simply help themselves to the money without either the client’s knowledge or approval. Something more is required.”

“31. In Re Bignold (1845) 9 Beav 269 (Bignold) a mortgagee’s solicitor retained the amount of his bill out of the proceeds of sale of mortgaged property. The mortgagor’s challenge to the bill asserted that he had never authorised any retention of the costs. It was in that context that Lord Langdale MR said in argument:

I have never, hitherto, considered that the mere retainer by a solicitor, out of monies in hand, of the amount of the bill, amounted to a payment, unless there has been settlement of the account.

32. Because there was no authorisation of the deduction, all that the solicitor had to rely on in that case was the bare statement of his bill. Lord Langdale’s phrase “settlement of the account” has been picked up in subsequent cases, but without any real clarity about what it meant. It is not, of course, a phrase that appears in the statute itself.

33. Re Ingle (1855) 21 Beav 275 was a case where the solicitor relied on a written retainer, but Sir John Romilly MR held, in effect, that it was unenforceable as the client was illiterate, and did not understand it. For practical purposes, therefore, that was also a case in which there was no contractual retainer. Having decided that the agreement was not enforceable, Sir John went on to say (in an observation that was not necessary for his decision):

As to payment, there was none; the solicitor was to retain, out of money to be received by him, the amount of his bill. Payment must either be actual payment in money, or an agreement by the client, on the settlement of accounts between him and his solicitor, that the amount shall be retained.

Again, the use of the phrase “on settlement of the accounts” lacks clarity.

34. Ex p Hemming (1856) 28 LT (OS) 144 (Hemming) was another case of mortgages and sales of estates. Again, the report does not reveal that there was any written contract of retainer between solicitor and client. Payments had been made by the client on account, and an account current delivered to him in December 1855, when the solicitors deducted their fees from the amount in hand and paid the client the balance. The client demanded a fuller bill which was delivered to him in August 1856. That bill showed fees amounting to more than the amount of the deduction. The question was whether the client was entitled to have the bill assessed (or, as it was then called, taxed) without showing special circumstances. The Court of Common Bench held that he was not. Cockburn CJ said:

It seems to me that what took place amounted to payment, unless there has been some gross overcharge, which would lead to a fair inference of fraud and overreaching. It appears that they had money in their hands raised by mortgage, when in 1855 they came to a final settlement, in which these bills were included. Mr Hemming submitted to those charges so made, acknowledged the account, and kept the balance in liquidation of the account. It has been ingeniously put that this does not amount to a payment; but it is the ordinary case of a man accepting a balance in liquidation of an account, and, I think, therefore, that these bills are paid and finally settled.

Williams J agreed. Crowder J said:

I think … that this is a payment of the claim, costs and charges which are made within the ordinary rule of a bill rendered and balance accepted, which amounts to a payment.

Willes J said:

There is nothing to prevent a man, sui juris, settling his attorney’s account without taxing it; he may pay if he like; and if that is not to be conclusive in the case of an attorney, just as in that of a grocer or butcher, then we should have a man, after a bill had been delivered, coming here with the numerous objections which may be raised, to upset that settlement.

35. Re Sutton & Elliott (1883) 11 QBD 377 was a decision of this court. Again there was no written contract of retainer. During 1877 the solicitors had sent three unsigned bills of costs to the client. The solicitors deducted the amount of their fees from monies which they had in hand on the client’s behalf. They rendered a further four itemised (but unsigned) bills in November 1881 together with a cash account. Sir Baliol Brett MR distinguished between the first set of bills and the second. As regards the first set of bills he held that they could be taxed, because they were neither signed nor paid. But as regards the second set, he held that taxation was not available. He said:

As regards the last four bills, a debtor and creditor account was handed to the client, or rather to Mr Hill, his solicitor, which is more important, and in such account, after taking into the account these four bills, a balance was shewn in favour of the client, and the amount of that balance was paid to such solicitor, who accepted the balance as correct, and took the money for it, so there was that which was equivalent to payment of these bills, and more than twelve months elapsed after such payment before application was made for delivery of a bill, and the only question now is whether that has prevented an order being made for the delivery of these last four bills, and in my opinion it has.

The Court of Appeal, therefore, held in that case that acceptance of the balance shown to be due back to the client after deduction of fees billed was payment.

36. In Re West, King & Adams ex p Clough [1892] 2 QB 102, the solicitor and client entered into an oral agreement, which was unenforceable because it was not in writing. The solicitors deducted the orally agreed fee from money in hand. Since the agreement was unenforceable, that, too was a case in which there was no valid contract of retainer. On the question whether the solicitors were entitled to make the deduction, Cave J, giving the judgment of the Divisional Court, referred to Lord Langdale’s observation in Bignold and said:

… we have been able to find no case in which mere retainer has been treated as payment. It is true there are cases in which retainer by the solicitor has been treated as payment, even when no proper bill has been delivered…; but those are cases in which there was a valid agreement, which dispensed with delivery of a bill, accompanied by a settlement of account between the solicitor and the client. … But we can find, as we have said, no case in which mere retainer, apart from any settlement of accounts, has been treated as payment.

In this case we find that there was no settlement of accounts, but only a mere retainer by the solicitors, and we are of opinion that that is not in any sense payment.

It is clear that the court was using the phrase “mere retainer” in the sense of a deduction from funds in hand which had not been contractually authorised. Moreover, it was a case in which no bill compliant with statute had been delivered.

37. Re Foss, Bilbrough, Plaskitt & Foss [1912] 2 Ch 161 was another case of no written contract of retainer. Neville J said:

In my opinion where clients have advanced moneys on account of costs prior to the delivery of a bill and the solicitors subsequently deliver a bill and appropriate the money of the clients in their hands in payment, this does not amount to payment of the bill within s 41 of the [Solicitors Act 1843], at all events where there has been no settlement of account.

That, too, therefore, was a case in which there had been no contract authorising the solicitors to make the deduction.

38. In Re Jackson [1915] 1 KB 371 the Divisional Court was unable to decide on the facts whether the retention of funds amounted to a payment, but remitted the matter to the Master for further inquiry. But both Horridge and Rowlatt JJ considered what would amount to payment. Horridge J said:

But I desire to state for the guidance of the Master what, in my view, constitutes payment within the meaning of s 10. The payment must be made in such circumstances as to show that the client understands that in making the payment he is carrying out the terms of the agreement previously entered into and ratifying it.

Rowlatt J said that he was of the same opinion; and went on to say:

Payment is an operation in which two parties take part. If a man collects a debt due to his debtor and purports to pay his own debt in that way, it is not really a payment unless the other party knows what is being done, and agrees that the sum received in that way by his creditor shall be used in the payment of his debt.

39. Gough v. Chivers & Jordan (21 June 1996), [1996] Lexis Citation 1048 (Gough) concerned payment to solicitors in the course of the administration of an estate. The solicitor in question was one of two trustees. The will contained a trustee charging clause. The two trustees agreed the amount of the solicitor’s fees, and the issue for the court was whether they could be challenged by a beneficiary under the will. Aldous LJ said:

… I believe this Court should construe s 70(4) of the 1974 Act, the word ‘payment’ in my view should be construed as covering the transfer of money in satisfaction of a bill with the knowledge and consent of the payer.

In so saying, Aldous LJ approved the decision of Stamp J in Forsinard Estates Ltd v. Dykes [1971] 1 WLR 232:

It is clear that if a solicitor without the knowledge or approbation of his client pays his own bills out of monies of his client and hands over the proceeds, that is not payment within the meaning of [section 70 (4) of the Solicitors Act 1974].”

Here, the Court of Appeal said that the only question was what is required by Section 70(4) of the Solicitors Act 1974 to constitute “payment”.

The Court of Appeal said that the phrase “settlement of the account” should no longer be used in the context of the Solicitors Act 1974.

“Its meaning is unclear, and its origin lies in cases in which there was no written contract of retainer. Nowadays, solicitors and clients normally enter into a written contract of retainer, and in some cases they are legally required to do so.”

“The phrase used in the statute is “payment of the bill”.”

“…payment for the purposes of section 70 is a transfer of money (or its equivalent) in satisfaction of a bill with the knowledge and consent of the payer.”

“42. In order for a transfer of money to be in satisfaction of a bill, there must be a bill to be satisfied. A “bill” in this context means a bill that complies with the requirements of section 69. The delivery of a compliant bill will give the client the necessary knowledge. The requirement of consent does not, in our view, require that consent be given after the delivery of the bill, if the client has already validly authorised the solicitor to recoup his fees by deduction from funds in his hands. What the client needs to consent to, in order for payment to take place, is “the transfer of money”, not necessarily the precise amount to be transferred. We reject the submission that the client must agree to a deduction quantified in pounds and pence. It is the process of assessment that fixes the precise amount that the client is required to pay.

43. The statute itself lays down the timetable, which is triggered by the delivery of a compliant bill. It is wrong in principle for judge-made law to qualify that timetable by the introduction of such indeterminate concepts as “a reasonable time” after delivery of a compliant bill. Either payment has taken place, or it has not.

44. It must not be forgotten that, even if money has been transferred with the consent or authority of the client, the client still has the right to challenge the precise amount through the medium of section 70, subject to the time limits laid down in the statutory timetable. That right exists whether or not the client has agreed the precise amount, whether before or after the transfer.

45. Whether the client has authorised the solicitor to recoup fees by way of a deduction from funds in hand is a question of interpretation of the written contract of retainer. In our judgment it is clear that the CFA in this case, and its accompanying documents, specifically authorised the Solicitors to recoup their fees out of the Client’s compensation, up to a maximum of 25% of that compensation. Payment of the bill took place when, after delivery of the bill, the Solicitors made that deduction. It follows, in our view, that payment of the bill took place more than one year before the bill was challenged and that, consequently, the court’s power of assessment was barred by section 70(4).”

COMMENT

An outstanding decision by the Master of the Rolls.

I have criticised him for his Ombuds people/ChatBox/ funnel approach to litigation in low value cases.

The Master of the Rolls clearly means well and has done much in his judgments – in Belsner as well as here – to enhance access to justice.

Maybe he is right about chat boxes, funnels and Ombuds people, and I am wrong.

Maybe not.

However, his judgments are, generally, very welcome indeed.

Maybe a day in my office with real clients with low value claims would educate us both.

NUREMBERG COUNTY COURT: HERE WE COME

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COMPULSORY MEDIATION: NO RIGHT TO A TRIAL

On 25 July 2023, a bleak day for justice in England and Wales, the Ministry of Justice ordered that the court system will end for all claims of less than £10,000, unless the parties have mediated.

Failure to engage will result in strike out and/or fines.

All claims issued under the usual Part 7 procedure of the Civil Procedure Rules will be caught.

Once a defence is filed and the case allocated to the Small Claims Track, the case will proceed to the courts’ existing free small claims mediation service, but it will be compulsory, whereas now it is voluntary.

Parties will have a separate one-hour telephone conversation with the mediator and if settlement is reached, then a legally binding formal agreement will be registered with the court.

If no agreement is reached, then the dispute will be heard a judge who can impose sanctions on the parties for failing to mediate including striking the claim out.

There are plans to “integrate mediation in the court process for higher-value claims”, that is to abolish the right to trial in all but higher-value claims.

The purpose is to save public money with the Justice Minister stating:

“A vast number of cases that go through the civil courts each year could be settled far more swiftly and with less stress through mediation. By integrating mediation for small civil claims, we will create valuable court capacity, freeing up time for judges and reducing pressures on the courts.”

COMMENT

Extremely dangerous rubbish.

Proper resourcing of the courts achieves this whilst protecting peoples’ right to go to court.

All sub-£25,000 claims going to non-judges is very clearly the agenda, thus scrapping the judicial process for Fast Track claims as well as Small Track claims.

£10,000 is not “small” to most of the population of this country, let alone £25,000.

Appoint ex-judges like me for a day a week to clear the backlog, invest in the courts and judiciary, and set-up pop-up courts, have remote preliminary hearings and recognize that judges are appointed to hear cases, not to avoid hearing them.

It is not rocket science.

The end court for this programme is the one at Nuremberg.

EVIDENCE NEED NOT BE IN WITNESS’S FIRST LANGUAGE

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In

Afzal -v- UK Insurance Ltd [2023] EWHC 1730 (KB)

the King’s Bench Division of the High Court held that multi-lingual witnesses may give evidence in English, even if it is not the witness’s first language, and thus, overturned a heavily criticised decision of Manchester County Court which said that witness statements had to be in the person’s first language.

I published a Special Newsletter on this subject at Issue 116 – WITNESS’S OWN LANGUAGE SPECIAL.

The Trial Judge had held that the claimant had to give evidence in his own language, which was not English, and his failure to do so was a breach of CPR 32 Practice Direction 18.1.

Consequently, the claimant was unable to prove his case, a personal injury one where liability had been admitted.

The claimant appealed on the basis that the Trial Judge misconstrued the law, both in insisting on finding that the evidence as a matter of fact and/or law had to be given in Urdu  and that, in any event, the Court should have allowed the claimant to rely on his written evidence.

The High Court here set out the relevant Civil Procedure Rules and Practice Directions in detail and examined the relevant case law and in particular the decision in

Correia v. Williams [2022] EWHC 2824 (KB) (11 September 2022)

The Court here pointed out that, although not mentioned in  Correia, the Business and Property Courts Guide, which came into force in April 2021, one year after the amendment to Practice Direction 32 relied upon by the Trial Judge here, is in very different terms.

At paragraph 3.3 it states:

“A trial witness statement must comply with paras.18.1 and 18.2 of Practice Direction 32, and for that purpose a witness’s own language includes any language in which the witness is sufficiently fluent to give oral evidence (including under cross- examination) if required, and is not limited to a witness’s first or native language.

(Paragraph 18.1 of Practice Direction 32 requires a trial witness statement to be in the witness’s own words, if practicable, and to be drafted in the witness’s own language and in the first person; paras.18.1(1) to (5) and 18.2 set out further requirements; para.23 of Practice Direction 32 provides that a party who relies on a witness statement in a foreign language must also file a translation.)”

The Queen’s Bench Guide [2016], replaced almost word for word by the King’s Bench Guide [2022], and referred to in Correia, says:

“If a witness is not sufficiently fluent in English to give their evidence in English, the witness statement should be in the witness’s own language and a translation provided.”

In Correia the Court also referred to paragraph 19.13 of the then Chancery Guide, which read:

“If a witness is not sufficiently fluent in English to give his or her evidence in English, the witness statement should be in the witness’s own language and a translation provided.  If the witness is not fluent in English but can make himself or herself understood in broken English and can understand written English, the statement need not be in his or her own words provided that these matters are indicated in the statement itself.  It must however be written so as to express as accurately as possible the substance of his or her evidence.”

“37. In my judgment, assistance is derived from the references to the guides, and especially to the extract from the Business and Property Guide because this postdates in time the provisions of CPR 32, PD 18.1.  It is significant in my judgment that the authors of the guide referred to the witness statement having to comply with paras.18.1 and 18.2 of Practice Direction 32.  They could not have been taken then to have been intending to give a new meaning to paras.18.1 and 18.2, but rather to have spelled out what the meaning and effect of 18.1 and 18.2 were. 

38. The reference to “for that purpose the witness’s own language includes any language in which the witness is sufficiently fluent to give oral evidence (including under cross-examination if required) and is not limited to a witness’s first or native language” are in my judgment words of clarification rather than gloss.  Perhaps it had occurred to them that there was a need for an explanation to be set out, but in my judgment this points significantly to the correct understanding of the meaning and effect of paras.18.1 and 18.2. 

39. It does seem unlikely that it was intended that a separate regime would apply in relation to the Business and Property Courts as opposed to that which would apply in other courts that were not governed by that guide.

40. This construction accords with the purpose of the relevant Practice Direction.  The background to it was the concern about what would happen to witnesses who were not proficient with the English language; the problems of vocabulary and nuance that were described by the Judge at paras.8 and 9 of her judgment.  That does not mean that it was intended that those who were bilingual, or those who were sufficiently fluent in English to give oral evidence including under cross-examination, should not be able to give their evidence in English. 

41. Attention has been drawn to the practical problems that would arise if the Practice Direction had a meaning, the effect of which would be that where somebody’s native language was a foreign language but they were sufficiently fluent in English to give evidence in English, that they would then have to prepare statements in that foreign language. 

42. My attention was particularly drawn to the fact that there may be millions of people in England and Wales who are sufficiently fluent in English but have a different mother tongue or first language.  There may be repercussions for access to justice, and indeed other considerations, in the event that they were required, notwithstanding their sufficiency in English, to provide a witness statement in their mother tongue. 

43. All of these points simply give further force to my judgment that the intention of the provision at PD 32, para.18.1 does have the meaning referred to in the Business and Property Courts Guide; that a witness’s own language includes any language in which the witness is sufficiently fluent to give oral evidence including under cross-examination if required.

44. It therefore follows that in my judgment the Judge was wrong to reach a conclusion that the language of the witness statement had to be the first language of the claimant, and that it was highly relevant that the claimant read, understood, conversed and gave instructions in English.  If there were doubts about the proficiency of the claimant as to whether the claimant was sufficiently fluent, then that could have been tested with a view to considering whether the evidence should be excluded.  There was no such exercise before the court.”

COMMENT

 A very welcome decision.

90% LIABILITY PART 36 OFFER VALID: MUNDY CASE DISTINGUISHED

Fixed Recoverable Costs Extension: Autumn Course Details

Details of the courses are here, and can be booked here.

In

Chapman v Mid and South Essex NHS Foundation Trust (Re Costs) [2023] EWHC 1871 (KB) (20 July 2023)

the King’s Bench Division of the High Court held that a claimant’s offer to accept 90% of damages in a clinical negligence case where there was a subsequent liability trial, but not yet a quantum trial, was a valid Part 36 offer.

Here the offer was made on 22 December 2022 and the judgment on liability was handed down on 30 May 2023.

The offer was described in the letter from the claimant’s solicitors as

 “an offer to settle the liability and causation issues in this action for 90% of damages assessed on a 100% liability basis, that is with a deduction of 10% from the full value of the claim”.

The claimant won on a 100% basis and so obtained a judgment “at least as advantageous” to her as a Part 36 offer.

The High Court held that if it was a valid offer, then it would not be unjust to make those orders referred to in CPR 36.17(3) and (4) that are applicable at this stage, where no quantum trial has taken place, and therefore, no determination of damages to be awarded to the claimant has occurred.

Clearly the items in CPR 36.17(4)(a) and (d) relating to enhanced interest on damages and an uplift on damages respectively did not apply, but the provisions relating to indemnity costs and enhanced interest on those costs did apply.

So far, so good.

The potential problem was the heavily criticised decision in

Mundy -v- TUI UK Ltd [2023] EWHC 385 (CH)

Technically distinguishing that decision, the High Court here effectively rejected it.

Here is the relevant, and important, part of the judgment in this case.

“28. However, the factual context of Mundy is important. This was that the Claimant had made two separate Part 36 offers (one based on a 90/10 liability split and one to accept £20,000 pounds in settlement of the claim) and the Defendant had made a Part 36 offer of £4000 in full settlement. The Claimant was ultimately awarded £3,805.60 but nevertheless argued that the judgment was at least as advantageous to him as the proposals in his 90/10 offer: [1] and [6]-[8]. At [32], Collins Rice J identified a “particular difficulty” with the Claimant’s position, namely that it seemed to:

“…cut across the binary structure of CPR 36.17(1) by contemplating a situation in which the answer to both limbs could be “yes”: A claimant can have failed to beat a defendant’s money offer, but still have beaten or equalled his own liability offer. That raises the problematic prospect of subsections (3) and (4) both applying in circumstances where it is far from obvious that this is in the contemplation of the rule at all”.

29. While Collins Rice J did discuss 90/10 liability offers in general terms at [36]-[42], I do not understand her judgment as purporting to hold that Part 36 consequences cannot flow from such offers made in different factual circumstances from those before her, and any such finding would be obiter in any event. Collins Rice J’s analysis was based on the difficulty of comparing monetary offers with liability offers of this kind. While such a difficulty may arise in claims such as Mundy where liability and quantum issues are tried together and both liability and monetary offers have been made, the analysis does not apply in this case given that a split liability trial had been ordered and the only substantive offer made by either party was the Claimant’s 90/10 liability split offer.

30. Further, in Mundy at [36], Collins Rice J appeared to acknowledge that a 90/10 liability offer could be effective in cases where there was a “genuine question of issues-based liability”. There was, until judgment, a genuine prospect of a finding on split liability as between the parties in this case. I did not find that the contributory negligence argument in relation to the Dr Bopitiya claim was one that did not have “the slightest prospect of success” as in Mundy at [11]. Although Mr Post now advances that contention, the Defendant had maintained this allegation at trial and my rejection of it was based on my decision as to the point at which the Claimant would have undergone surgery but for Dr Bopitiya’s negligence, all matters that were heavily contested by the Defendant at trial.

31.In any event, Mundy is distinguishable from this case because the manner in which the Claimant’s 90/10 offer applied to the causation issue had been made clear in correspondence and was reflected in the liability judgment.

32. For these reasons I do not accept that the reasoning in Mundy is applicable here. In my judgment the Claimant’s 22 December 2022 offer was a valid one for Part 36 purposes.

COMMENT

A welcome, correct and sensible judgment.

It still leaves open the issue of how to split liability and quantum costs.

Even where there is a liability trial, there is inevitably work done on quantum and the successful Part 36 offeror appears to get the benefit of indemnity costs on all the work done after the expiry of the period for accepting the Part 36 offer.

It is hard to see how any other method would work, without a huge amount of work on splitting the bill into quantum and liability work.

I predicted that the flawed decision in Mundy would be thrown in the faces of claimant by defendants.

It was here.

I set out my writeup of the distinguished- that is it has been distinguished by another court, not that it was a distinguished judgment- which appeared at 819 of the Newsletter in Issue 150 here.

PART 36 AND LIABILITY: JUST HOW WRONG CAN THE HIGH COURT BE?

In

Mundy -v- TUI UK Ltd [2023] EWHC 385 (CH)

the Chancery Division of the High Court, on appeal from Swindon County Court, got the law on Part 36 offers and liability just about as wrong as is possible.

The decision is so hopelessly flawed and in conflict with numerous Court of Appeal decisions, that it is per incuriam – that is wrongly decided – and can be ignored, and indeed is being ignored, by other courts.

However, successful claimants will now have this decision thrown in their faces by losing defendants, so it is necessary to deal with it.

The County Court and the High Court arrived at the right conclusion, that is on the facts here that the claimant should not get the CPR 36.17 enhancements, but for the wrong reasons, and it is those wrong reasons which are likely to cause problems in other liability offer cases under Part 36.

It was said that there was no previous High Court authority on the point, which is nonsense.

The claimant brought a holiday sickness claim against the defendant holiday company and made two Part 36 offers on the same day:

1) £20,000 inclusive of interest and special damages;

2) liability on a 90% / 10% basis in his favour.

The defendant made a Part 36 offer of £4,000.

None of the offers was accepted and the matter went to trial, and the claimant won on a 100% liability basis, but only recovered £3,805.60.

Thus, the claimant had beaten its own liability offer, but had recovered less than 20% of its own quantum offer and had failed to beat the defendant’s quantum offer.

The claimant submitted that as it had beaten its liability offer, it should get the Part 36 enhancements.

Here, the defendant had pleaded contributory negligence, and therefore, whatever the position in matters generally, it was obviously entirely reasonable and sensible for the claimant to make a liability offer, accepting a degree of clinical negligence.

The Court, bizarrely, said that the defendant’s plea of contributory negligence was “a hopeless idea” and that

“… no competent legal adviser could have regarded the contributory negligence plea as having the slightest chance of success.”

It, therefore, held that the Claimant’s offer was not a genuine offer to settle, but “a plainly tactical device, to take advantage of a foolish piece of pleading”.

That is one of the most bizarre statements by a court in English legal history.

A claimant sues. The defendant argues contributory negligence. The claimant accepts a degree of contributory negligence.

However, the court, talk about descending into the arena, rejects the whole concept of contributory negligence.

Furthermore, having stated that the defendant’s pleading of contributory negligence was foolish, it then punishes the claimant for making a Part 36 offer on liability, and beating it.

The whole judgment makes Alice in Wonderful look rational.

Thus, the Court treated the offer as for 90% of the quantum claim, and the claimant had failed to recover 90% of the £20,000 that he had offered by way of a quantum settlement.

Thus, the claimant had not beaten his own offer.

In fact, the claimant had achieved at Court, more than 90% of the amount offered by the defendant.

The matter becomes somewhat complicated in that if the claimant was held to have beaten his own 90% offer, and was entitled to the enhancements, including a 10% uplift on damages, then he would have beaten the defendant’s quantum offer as well.

So there are two separate issues.

Many of the cases involve a claimant making a quantum offer which equates to 95%, 99%, or whatever, of the total claim and these are not liability offers.

In these cases, the issue has been whether such an offer, giving very little discount, is a genuine offer to settle.

I have dealt with this extensively in

PART 36: 2023 SPECIALS – PART 12 – GENUINE OFFER TO SETTLE

However, there are very many cases on the issue of liability alone.

A claimant used to have to beat its own offer to succeed, but following a change in the law by Parliament, now only has to match its own offer.

Before that change, courts had held that where an offer of 100% liability had been made, and the claimant had won, that that counted as a win for Part 36 purposes, as the claimant could not have done any better.

In other cases, a claimant who had made a liability offer and won the first part of a split trial was refused any extras by the court at that point, because it was unaware whether the defendant had made a quantum offer, which the claimant may then fail to beat at the quantum hearing.

That is, of course, what happened here, albeit not after a split trial.

Clearly there is a tension between offers where both parties win, that is a claimant beats its own Part 36 liability offer, but fails to beat a defendant’s quantum offer, which is the position in this case.

In those circumstances, it is a matter of judgment for the court, and for it to exercise its discretion under CPR 36 .17(4) to decide whether it is unjust to award the enhancements.

This will happen in other scenarios.

A claimant may make a Part 36 offer in relation to special damages, and beat it, but fail to beat a defendant’s overall quantum offer.

It is strongly arguable that the claimant should get enhancements in relation to special damages, as all of that work would have been saved had the special damages offer been accepted.

Any other outcome is absurd.

A claimant could make a very reasonable offer on special damages, which would have saved, say 50 hours work but fails to beat the defendant’s overall quantum offer.

Not only does the claimant risk not getting the enhancements but has to pay the defendant’s costs from the date of the expiry of the defendant’s offer, including for those 50 hours work on special damages, which was entirely unnecessary.

Of course, it can work the other way round; a defendant makes a perfectly good offer on special damages which the claimant fails to accept, then the claimant beats its overall offer on damages, and gets indemnity costs for all the unnecessary work in relation to special damages.

If Parliament, and the Civil Procedure Rules Committee, had intended that, then the rule can be simple:

“An offer can only be for quantum, and only for the whole of the case, and any issues within the case cannot be dealt with by way of a Part 36 offer”.

In fact, all the rules, and the whole tenor of Part 36, is exactly the opposite.

Consequently, it is most definitely not all or nothing, and there can indeed be different winners of different stages of the litigation.

This should not come as any surprise to anyone, as throughout protracted litigation, it is common for the eventual winner to nevertheless lose, and have costs orders made against it, in relation to certain interlocutory matters.

A claimant who has failed to beat a defendant’s quantum offer, but has beaten its own liability offer, should certainly not be the sole winner.

One option is to award the claimant the enhancements of indemnity costs and enhanced interest thereon, between expiry of its liability offer, and the defendant’s unbeaten quantum offer if made later.

If the defendant’s unbeaten quantum offer comes first, then there is no reason why the claimant should get any enhancement as it could have resolved the whole matter by acceptance of that offer and without the need to carry on and make a liability offer.

For a court to hold that a liability offer cannot be made, is plain wrong.

The law is clear, both in Part 36 itself, and in previous decisions.

CPR 36.2(3) states that a Part 36 offer may be made in respect of the whole, or part of, or any issue that arises in a claim, counterclaim or other additional claim or an appeal or cross-appeal from a decision made at a trial.

That is all encompassing.

CPR 36.3(c) defines a trial as meaning:

“any trial in a case whether it is a trial of all issues or a trial of liability, quantum or some other issue in the case” (my bold).

Thus, liability is specifically stated in CPR 36 to be an issue, which very obviously it is, and as we have seen, CPR 36.2(3) provides that a Part 36 offer may be made in respect of any issue.

Furthermore, what is the point of defining a trial as including a liability trial if an offer on liability cannot be made?

A claimant offer a 50 – 50 liability settlement.

That is not accepted by the defendant and the matter goes to a liability trial and the court finds in favour of the claimant on a 75% / 25% basis.

If the Part 36 offer cannot be made, does the defendant then get the costs of that liability trial for having established 25% contributory negligence, even though the claimant had offered 50%?

On the reasoning in this case, the answer is yes, and that is mad.

CPR 36.5(4) states:

“(4) A Part 36 offer which offers to pay or offers to accept a sum of money …”

That clearly envisage non-monetary offers, e.g. on liability.

CPR 36.12 reads:

“Acceptance of a Part 36 offer in a split-trial case

36.12

(1) This rule applies in any case where there has been a trial but the case has not been decided within the meaning of rule 36.3.

(2) Any Part 36 offer which relates only to parts of the claim or issues that have already been decided can no longer be accepted.

(3) Subject to paragraph (2) and unless the parties agree, any other Part 36 offer cannot be accepted earlier than 7 clear days after judgment is given or handed down in such trial.”

What else can this possibly refer to except a liability offer, with the issue of liability having been decided?

Maybe I have missed something. Are courts now routinely hearing quantum trials before liability trials in split-trial cases?

I do not think so.

Suppose a claimant makes a 50% liability offer at the outset and the defendant makes no offer, and the claimant wins at trial.

Why should that claimant not get the enhancements when it was prepared to jettison half of the claim in order to settle it?

Had the claimant offered a quantum settlement of 99%, it would get the extras, but offering a 50% liability concession does not get the claimant those extras.

Again, it is irrational and very clearly not what Parliament intended, nor what the Civil Procedure Rules say.

How does it operate in a claim where there is no monetary offer?

Part 36 specifically recognizes that there can be Part 36 offers in such cases, as CPR 36.17 (4)(d)(ii) specifically provides that the 10% uplift in such cases shall be on costs, there being no damages to uplift.

I completely recognize that this is a difficult rule, but it is also the most important rule, by a million miles of the Civil Procedure Rules.

The legal profession and the population of England and Wales deserve better than this.

MASTER OF THE ROLLS: A PERIOD OF QUIET ON YOUR BEHALF WOULD BE WELCOMED

I set out below analyses, links and the text of recent speeches by the Master of Rolls.

This is not just entering the political arena: it is a wholesale attack on the rights of ordinary people and access to justice and is bound to force small firms like mine out of litigation and mean that many people will have no access to the legal system.

The Master of the Rolls frequently refers to the Official Injury Claim Portal, as though it is some sort of triumph. In fact, it has been an utter disaster and has seen claims drop by 50%, meaning that 50% of injured people can no longer claim compensation, which was itself reduced by 80% in relation to whiplash injuries.

I presume that is why he regards it as a success.

The Portals, designed for ordinary people to bring claims themselves, are incomprehensible, unworkable and a disgrace to a supposedly civilized society believing in the rule of law.

This attempt to exclude from the courts, all but the very wealthiest, must be stopped.

Once Russian Oligarchs, huge businesses, Senior Judges and politicians are happy to use chat boxes, ombuds people etc., rather than the courts and lawyers, maybe we will listen to them.

Let’s start now.

Let us have a short Act of Parliament prohibiting any claim valued at £10 million or more being heard by the courts. These claims use up a lot of time and resources. These people are rich anyway so it does not matter if their claims cannot be heard.

Let Amazon / Google / ChatBox / Ombuds people determine them.

The Master of the Rolls should learn from one of his most illustrious predecessors – Lord Denning – and sit in local courts as Lord Denning did and see the destruction that is being wreaked on this country by these policies.

Scrap all portals and re-open the County Courts. Scrap all National Business Money Online Damages Official Injury Courts and have matters dealt with in local courts.

MASTER OF THE ROLLS, LAWYERS, JUDGES AND NECESSARY MECHANISMS TO DEAL WITH ARTIFICIAL INTELLIGENCE

At the Law Society of Scotland’s Law and Technology Conference the Master of the Rolls, Sir Geoffrey Vos, considered the impact of artificial intelligence on legal services and dispute resolution.

He referred to a case where submissions prepared by a US lawyer using ChatGPT contained “bogus decisions with bogus quotes and bogus citations” – the errors were identified because the Judge checked the cited cases.

Observations included:

• Non-specialised artificial intelligence tools will not help professional lawyers as much as they think, but specialised legal artificial intelligence will be different.

• ChatGPT identifies its most valuable dispute resolution uses as drafting, document review, and predicting case outcomes to inform strategy and settlement negotiations.

• Clients are likely to press for use of large language models, checked by lawyers, if that is cheaper.

• Rules or professional codes of conduct might regulate use of large language models, and users’ responsibility. Rules committees and regulators will need to consider this as a matter of urgency.

• Artificial intelligence must be programmed to understand the full import of human questions, humans need to be “savvier” checking facts; programmers need to explain to artificial intelligence programmes what humans’ open textured questions, such as “Is this a real case?“, mean.

• To realise their full dispute resolution potential, large language models must be trained to understand principles upon which lawyers, courts and judges operate.

• Clients are likely to insist that all tools available are at least considered.

• Artificial intelligence will be used within the digital justice systems in England and Wales: for example, keeping users informed of the process.

• Artificial intelligence might eventually be used to take decisions, subject to necessary controls, notably transparency regarding judicial and “machine” decisions, plus a right of appeal to a human judge.

• For some commercial and compensation disputes, confidence in machine-made decisions may develop more quickly than many anticipate.

• As it recognises, ChatGPT’s accuracy depends on the quality of the data and the complexity of legal concepts. Combined with human judgement and expertise, it might be a valuable tool for predicting case outcomes.

However, legal decision-making involves other factors including strategic and ethical considerations, and client goals: a possible “lifeline” for the future of the legal profession.

Source: Courts and Tribunals Judiciary: Speech by the Master of the Rolls to the Law Society of Scotland (14 June 2023).

Master Of The Rolls’ Evidence To House Of Commons Justice Select Committee

The House of Commons Justice Select Committee has published a transcript of evidence given by the Master of the Rolls to the Committee on 6 June 2023.

Matters covered included:

• County Court, Damages Claims Pilot and Online Civil Money Claims.

The Master of the Rolls attributed the delays in the County Court to a lack of capacity at the district bench, particularly in London and the Southeast and highlighted measures taken including starting a virtual pilot using remote hearings to clear backlogs.

The Damages Claims Pilot and Online Civil Money Claims have led to a tripling in the speed between issue and directions and by the end of the Damages Claims Pilot, it will be available to litigants in person.

• Fixed Recoverable Costs.

While the Fixed Recoverable Costs rules will “change the landscape” of civil justice, the Master of the Rolls stated that this is a “good thing”, which should not affect access to justice, provided there are safeguards.

He forecast a reduction in interlocutory hearings as there will be less costs budgeting.

• The Solicitors Act 1974.

While it is time for a review of the Act, this would require “a lot of work”, including co-operation with the profession.

The Master of the Rolls reiterated his comments from Belsner v Cam Legal Services Ltd [2022] EWCA Civ 1387, that the distinction between contentious and non-contentious costs is not logical.

The  “online funnel” vision.

Two years after he first outlined his ‘funnel’ plan of online dispute resolution, he was able to assert its components, and the crucial governance mechanism, are beginning to take shape.

“Technology provides part, if not the entirety of the solution to many of the problems we face in our justice system,” the 98th Master of the Rolls told MPs.

 He set out a plan for a three-tier process.

Stage one is a universal ‘landing page’ in which anyone with a civil dispute would set out the bare bones of their matter.

This would offer basic legal advice and steer them to the most appropriate specialist online forum.

Examples might be Online Civil Money Claims, Official Injury Claim or the dispute resolution service for small and medium-sized companies being set up by a private sector joint venture.

“Only if the second tier fails, then will your data be transmitted via an application programming interface into the justice system.”

The presumption is that only a tiny proportion of claims would get that far – hence the ‘funnel’ analogy. In theory the public courts system would deal only with disputes of high value and/or exceptional complexity – plus, inevitably, those with parties emotionally determined to have their day in court regardless of cost.

What is groundbreaking about the funnel, Vos said, is its mix of public and private sector services and integration between the two. “There needs to be coherence between those that are resolved by the courts and those resolved by other means – it has never been done before.”

The committee is being established under the Judicial Review and Courts Act 2022. It will operate “very differently to existing rules committees”.

For a start, it will generate far fewer rules – the system itself will provide them.

 Rather than specifying which boxes to complete, the rules will be at a much higher level, for example “you must hear the submissions for each party.”

“You won’t need them in the way you need the White Book today because the system will tell you what to do.”

He stressed that, like all elements in the system, it will be designed for litigants in person:

“I can envisage having real legal advisers, not AI chatbots, giving advice to people who need it at the earliest possible stage.”

 “We must not lose sight of the fact that real people need real help.”

• Mediation.

Mediation will be integrated in the Master of the Rolls’ “online funnel” vision, leading to faster resolution of most disputes.

If mediation were mandatory, which he recognised is contentious, the Master of the Rolls expected that a larger number of cases would settle, fewer cases would need to be heard and delays would be reduced.

SPEECH BY THE MASTER OF THE ROLLS: DRIVING SYSTEM CHANGE AND ADDRESSING INJUSTICE

“1. It is an honour and a pleasure to have been invited to address this conference. Ombuds processes are a massively important and under-recognised part of the legal system in general and of dispute resolution in particular.

2. Since I became Master of the Rolls and Head of Civil Justice in January 2021, I have been trying my hardest to provide some coherence to the resolution of the many millions of small disputes that arise every year in England and Wales between citizens, between citizens and small businesses, between SMEs, and between all those and large businesses or the state. Cases that reach the court system are very much the exception rather than the rule. Yet, for many years, much in the world of dispute resolution has been viewed through the lens of court-based dispute resolution.

3. In talking about civil disputes, I include family cases and tribunal cases, whether employment tribunals or property tribunals that deal with cases between private parties or immigration and social security tribunal that deal with disputes between citizens and the state.

4. I am pleased to say that we are now on the brink of a revolution in dispute resolution. We are no longer fixated on court-based systems, but we are in the process of creating a truly holistic Digital Justice System. The statutory foundation for that system was enacted in sections 22-24 of the Judicial Review and Courts Act 2022. Those sections allow for the creation of an Online Procedure Rules Committee, the composition of which was announced last week. The OPRC will have oversight of the online court-based dispute resolution processes created by the HMCTS Reform Programme and the digital pre-action portals and other processes that resolve many thousands, if not millions, of disputes every year without the parties going anywhere near a court.

5. I am the first chair of the OPRC, and the other judicial members are the President of the Family Division and the Senior President of Tribunals. The three lay members announced last week are a solicitor, Brett Dixon, a tech expert, Gerard Boyers, and a representative of the advice sector, Sarah Stevens.

6. The vision of the future that lies behind the OPRC and the digital justice system for which it will provide the oversight and governance, is that anyone with an issue or dispute, individual or business, should be able, in this technological era, to go online to be directed to the dispute resolution process that is most appropriate for their problem. I see that as the first tier of a digital dispute resolution system. It will obviously need to offer early legal services and advice in appropriate cases. That is what the new Lord Chancellor calls: “ELSA”. There have been pilots in Middlesborough and Manchester. In many cases, the first tier will simply direct an employee with a problem to, for example, the ACAS site, and the financial services customer with a problem to the Financial Ombudsman Service and so on.

7. The second tier of the Digital Justice System is the pre-action dispute resolution services and portals which many of those here today have provided, without fanfare, for many years. Some are privately funded. Some are publicly funded. Some are statutory and some are industry backed. It is still not entirely clear to me how many non-court-based dispute resolution services are available in the UK. But I know there are many. And I know they deal with many thousands of cases. The Housing Ombudsman dealt with 26,771 complaints last year. The FOS received 279,146 complaints in 2021/2022. ACAS received 91,000 requests for individual dispute resolution services in the same year. The Legal Ombudsmen received 4,573 cases, and so on and so on.

8. In the field of personal injury, the Whiplash portal, more properly called the Official Injury Claims Portal, has dealt with some 501,451 claims since its inception in 2021, and the RTA portal was dealing with some 600,000 claims every year before that.

9. I am optimistic that an SME portal will shortly be created to resolve disputes between small and medium sized enterprises without the necessity for court process.

10. I want to be absolutely clear that nothing I am doing or that the OPRC will do is intended to make life more difficult for ombuds services. The objective is to provide a level of coherence, integration, and greater accessibility. Everyone who has an issue ought to be able to obtain access to appropriate dispute resolution services online. Moreover, one of the advantages of the digital environment is that it abrogates the need to recreate the data relating to each case again and again if it proceeds from one dispute resolution environment to another. It ought to be possible to transmit the data set created by the whiplash portal, for example, directly into the court-based Online Damages Claim process through an application programming interface or API.

11. The objective is to create an online funnel through which any dispute, large or small, can pass with the ambition of providing resolution at the earliest possible stage, at the lowest possible cost, and in the shortest possible time.

12. The economic and psychological costs of leaving disputes unresolved is great. Individuals are far less productive at work if they are preoccupied with a personal issue such as a family dispute, a housing issue, or an employment problem. There is a great economic prize to be won if we can expedite dispute resolution and integrate dispute resolution processes.

13. It is, of course, essential that a state funded court-based dispute resolution process, staffed by an independent judiciary, is available to all citizens to resolve all disputes. But that does not mean that every dispute should be required to go to court as a first option, where other cheaper and less time-consuming options are available. People are voting with their feet. They are using industry-funded ombuds processes to good effect. They are using privately funded mediation services before starting court proceedings and they are using the available pre-action portals in ever increasing numbers. The digital justice system and the OPRC that is responsible for it seek to provide the architectural coherence and integration that has long been lacking.

14. So where does the OPRC fit in to this Digital Justice System. I emphasise that the OPRC is new and has not yet even held its first meeting in its fully constituted form. That said, I see the OPRC as being quite different from the existing Civil Procedure Rules Committee, Family Procedure Rules Committee, and the Tribunals Procedure Rules Committee.

15. First, the OPRC will not simply be making rules. Rules are anyway different in the online space. It is not necessary to have a rule that says that a pre-action dispute resolution portal must ask each party their name and address, because the programme will require them to do so before they will be able to proceed. The rule-making process for the online court-based dispute resolution process will be more high-level and will dictate the standards that the dispute resolution processes governed by it must attain. It may, for example, have a rule saying that no decision must be made without both parties having had an opportunity to make submissions. In reality, though, the platforms on which online dispute resolution services sit will themselves provide much of the structure. We already see this with Online Civil Money Claims (OCMC) and Damages Claims Online that are services close to being able to provide end-to-end online civil court-based dispute resolution services. Some 90% of all civil money claims are now brought online, and more than 300,000 money claims have already been brought through OCMC.

16. Secondly, a big part of the OPRC’s activities will be to provide functional governance for the online platforms, making sure that the data created online is properly and appropriately handled and that the technological foundations of the processes are transparent and effective. By setting common technical standards, the digital development, which is already happening everywhere, can be coordinated.

17. Under section 24 of the Judicial Review and Courts Act 2022, the OPRC can provide governance for pre-action portals, in which I include the ombuds services provided so successfully in so many sectors. Many have asked me why Ombuds services would want to be any part of the Digital Justice System I have described. The answer is three-fold.

18. First, if ombuds processes can come within the framework of the Digital Justice System, it provides the coherence and integration that has, thus far, been lacking within the various disparate parts of the entire dispute resolution process. As I have already intimated, I have for long thought that applying the standards of court-based commercial dispute resolution in the Business and Property Courts to every dispute, making the processes far too cumbersome and unwieldy. There are literally only 3,000 odd cases per annum in the Rolls Building and yet we apply those standards to the millions of small disputes that arise in tribunals and courts and that don’t even get anywhere near a court. It is truly a case of the tail wagging the dog. Instead, we need to look holistically at the vast bulk of disputes that are resolved by multifarious processes, by ADR, by online portals, by ombuds people, by mediation and even by eBay and Amazon.

19. Secondly, bringing ombuds processes within the framework of the Digital Justice System improves access to justice, because it increases the chances of individuals with a sectoral complaint finding the appropriate process to have that complaint resolved.

20. Thirdly, it will allow the ombuds processes that are currently separate and governed by different rules and different procedures to become more joined up, both technically and in data terms. They will not be harmonised in any sense, but there will be an OPRC framework that will ensure they follow a fair and transparent procedure. Moreover, if an ombuds process fails to resolve a complaint to the satisfaction of the parties, it will be possible to transmit the data directly by API into the court-based part of the Digital Justice System.

Conclusions

21. It is incredibly important that our Digital Justice System is of the same, if not better, quality than our existing analogue dispute resolution processes. But we should not assume, as some do, that digitisation leads to less reliable and less just outcomes or that it excludes people altogether from the ability to vindicate legal rights. It is an essential principle of offering justice digitally that those who are unable to access the internet, or any digital offering, are provided with the same services in an accessible fashion. But that does not mean that we should deprive the vast majority of our digitally enabled citizens of dispute resolution processes that will be quicker and more cost effective for them.

22. In my view, sectoral ombuds processes are an essential part of our justice system and should be recognised and treated as such. The creation of a holistic Digital Justice System gives us the opportunity to deliver on that objective.

23. You may think that much of what I have been talking about passes like ships in the night alongside the nitty gritty of what your ombuds processes aim to achieve and are actually achieving. I realise that very few cases move directly from an ombuds process into the court system, whether digitally or at all. But that does not mean that the coherence of which I have been speaking is not a valuable prize. Many people with real problems are excluded from our current dispute resolution landscape because it is simply too hard to navigate. We owe it to these people to do everything we collectively can to produce an integrated and intuitive digital dispute resolution environment.

24. I look forward to answering any questions that you may have.”

FIXED RECOVERABLE COSTS AND COUNSEL’S FEES: A CONFUSING RULE

Fixed Recoverable Costs Extension: Autumn Course Details

Details of the courses are here, and can be booked here.

I am grateful to Professor Dominic Regan for drawing this point to my attention.

The confusion is in relation to counsel’s fees, ring-fenced and recoverable, in the Intermediate Track with effect from 1 October 2023, in relation to any case not issued by that date.

Stage 2 is described as:

“Specialist Legal Representative providing post-issue advice in writing or in conference or drafting Statement of Case”.

The first thing to note is that the extra for doing that in Complexity Band 4, as compared with Complexity Band 1 is just 15% that is £2,300 as compared with £2,000.

In relation to work done by solicitors, the fee in Complexity Band 4 is generally three to four times as high in Complexity Band 4 as compared with Complexity Band 1.

Stage 7, again

“Specialist legal representative advising in writing or in conference following the filing of a defence”,

has a Complexity Band 4 fee of just over double Complexity Band 1.

In Stage 2 under Complexity Bands 3 and 4, it is specifically Counsel, rather than a specialist legal representative.

I presume that that was not intended, but I can see paying parties arguing that that extra fee, £3,500, is only payable if it is indeed Counsel instructed, and not just a specialist legal representative.

There should be separate fees for each piece of work, or an inclusive fee for all the work, but the way it reads is that the specialist legal representative can either provide post-issue advice in writing, or in conference, or draft a Statement of Case.

Now, the alternative between providing post-issue advice in writing or in conference may not matter, and presumably Counsel would follow up an advice in conference with an advice in writing.

Why is Stage 7, Stage 7, rather than Stage 3 or 4?

Stages 3 to 6 are all post-filing of a Defence work and yet the specialist legal representative advising in writing or in conference following the filing of a Defence is a Stage 7.

I presume that that is intended to mean advising at any time following the filing of a Defence, rather than advising on the Defence.

This is very different wording from that in Lord Justice Jackson’s report, and I had a considerable input into this aspect of the matter.

The wording there, on Page 106, for Stage 2 was:

“Counsel/specialist lawyer drafting statements of case and/or advising (if instructed)”.

Stage 7 was:

“Counsel/specialist lawyer advising in writing or in conference (if instructed)”.

There was no reference there to this being following the filing of a Defence.

There was a footnote in Bands 3 and 4 providing for a 50% enhancement if there was a counterclaim and a Defence to counterclaim, but that was not limited to Counsel drafting it.

What happens if Counsel does it for less?

Following the decision in

Butt v Nizami [2006] EWHC 159 (QB) (09 February 2006)

the general rule is that the indemnity principle does not apply in Fixed Recoverable Costs cases, but this is of course a specific and separate disbursement, and it is arguable that the position must be different there.

For example, if a solicitor paid £300 for a medical report, they could not charge the other side £500.

INFLATION TO BE TAKEN INTO ACCOUNT IN APPLYING JUDICIAL COLLEGE GUIDELINES ON DAMAGES

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In

Blair v Jaber, Coventry Combined Court, Case No.: H56YY150, 8 March 2023

the County Court held that it should take into account inflation when considering the Judicial College Guidelines dealing with general damages for pain, suffering and loss of amenity in personal injury cases.

The Recorder observed that the current edition of the Judicial College Guidelines, the 16^TH, was published on 11 February 2022, nearly a year before the judgment in this case.

He said that it was apparent from the foreword that the figures for general damages in the guidelines were based on prices as at September 2021 and that between then and March 2023, when this judgment was given, the Retail Price Index had increased by 19%.

The Recorder pointed out that, unlike the Northern Irish Green Book, the Judicial College Guidelines do not take future inflation into account, and that he needed to consider “whether the figures in the guidelines should be increased to take the unexpected and massive increase in inflation into account”.

The Court stated that the Judicial College Guidelines are just that – guidelines – and that if there is a change in circumstances since the publication in April 2022, that is a matter to take into account when assessing damages.

“The very substantial drop in the value of money which has taken place since April 2022 is just such a circumstance. Accordingly, the Judicial College figures needs to be increased by, in my judgment, about 12%.”

COMMENT

It is about time that all apparently fixed tariffs, such as the Judicial College Guidelines, the Whiplash Tariff, the existing Fixed Recoverable Costs scheme, and the new Fixed Recoverable Costs scheme coming in on 1 October 2023, are automatically uprated by a named and identified Price Index, with it being an error of law for a court to fail to apply the relevant price increase or even decrease.

FICTITIOUS LAW REPORTS: THE NEW GAME IN TOWN

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In a recent case in Manchester a Litigant in Person presented fictitious case reports based on answers received from the Chat GPT chat box – see Law Society Gazette, 29 May 2023.

One case was completely fabricated but the others were real case names but with false quotes.

The Litigant in Person was unaware of this and was not penalised.

We spoke to Salisbury’s Law Reports who advertised that they could find cases to suit any legal argument – by making them up.

Q

Isn’t this illegal?

A

No, Charles Dickens made up cases. John Grisham makes up cases. It is called fiction – in fact, we use a lot of John Grisham’s stuff.

Q

But that is different from telling people that these are real cases to cite in court.

A

We don’t do that; we just say – “This may be of interest to you”. We are a sort of online McNaughten Friend.

Q

You mean a Mckenzie Friend.

A

No – McNaughten Friend, as in its namesake for the insanity rules.

Q

What cases have been relieved by the court that seemed so unlikely that no one would believe them?

A

We have had a couple recently.

In one we made up, the High Court threw out a case because the solicitors had paid the old fee, £28 less than the new one, when the court was closed, and no one could help. That was a corker!

In another one, the High Court held that a claimant was out of time for serving the claim form even before he received it because the Court took over four months to serve it and backdated it!

The Court of Appeal overturned it, but they really thought it was a real case!

Q

But they were real cases!

A

Really, who can tell now?

Our favourite now is creating a whole area of fictitious law.

Credit Hire is our best one.

You own an old banger worth £500, get it crashed and claim £1,000 a day Credit Hire charges!

It is our best ever.

In one of our cases a dinky toy car was damaged in our customer’s front room, and she got £4 Billion Credit Hire charges.

Q

Have you had any ideas that even you thought was so far out that you could not use them?

A

Oh yes. Plenty. We had this idea of the High Court saying that people had to choose between eating and feeding their family or paying the Employment Tribunal court fee to bring an unfair dismissal claim.

Another one was that the High Court disallowed all costs because a party was five minutes late filing their budget.

Loads of stuff like that, but obviously we could not use those ideas, as they are ridiculous and would damage our credibility.

Footnote

A party running such an operation commits no offence.

A litigant presenting such submissions without knowing that they are false commits no offence.

Digital AI freaks – be careful what you wish for.

COMPULSORY CAPPING OF SOLICITOR AND OWN CLIENT FEES IN FINANCIAL MIS-SELLING CASES

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The Solicitors Regulation Authority proposes to cap the amount a solicitor can charge its own client in financial mis-selling claims.

This is believed to be the first time a Regulator has tried to cap solicitor and own client costs in this way, although Parliament has done it in other areas.

The proposed limits largely match the existing ones imposed by the Financial Conduct Authority in relation to those it regulates.

A consultation is underway which ends on 21 June 2023 and the Consultation Paper is here.

The Solicitors Regulation news release is here.

The 2021 Discussion Paper is here.

In Issue 115 of the SRA Update published on 4 May 2023, the SRA, apart from the Consultation Paper, have asked for views on the issue under the heading:

Have your say on restricting fees in financial mis-selling.

This is slightly different from the news release of 31 March 2023 headed:

Views wanted on rules to restrict excessive fee charging in financial mis-selling claims.

The Solicitors Regulation Authority states that firms involved in this work have “broadly welcomed” the idea and have stated that they will still be able to operate profitably with the cap.

I act for several law firms doing this type of work and their reaction is unanimously the opposite.

Here is the comment, which I cannot improve on, made by one of the firms I act for:

“I do not believe that the SRA have taken into account the following:

1.We are obliged to buy professional indemnity insurance every year whereas FCA regulated claims companies are not. In our last accounts the cost of purchasing indemnity insurance was our second biggest expense after salaries, even though we have not had a claim under our PII policy this century.

2. As Solicitors we are obliged to maintain our practising certificates. This is additional expense that claims management companies do not have because they do not employ qualified Solicitors.

3. In our office, all the pension mis-selling cases are dealt with by myself or one of my Solicitor colleagues. Claims companies employ non legally qualified staff to handle these sort of cases.

4. We very rarely receive a complaint regarding our claim for costs which is delivered at the conclusion of the successful case. Indeed, most clients are extremely grateful and are satisfied with the outcome. 

5. It is my belief that clients want freedom of choice. They can choose a claims company if they want to and the bill to them at the conclusion of the case would be less than if the case was handled by a firm of Solicitors. However, it is a choice that they have and can exercise quite freely. Of course, we are obliged  and do advise clients upon our first contact with them what our fees are. Thereafter our contingency fee agreement is sent to the clients by post who can then enter into the agreement or not.

6. Our levels of service are second to none. A Solicitor is always available 24/7 to deal with existing clients’ enquiries or to answer enquiries from potential new clients. This is not something that claims management companies offer as they simply employ a call centre to collect data from any new enquiries.”

As often with regulators, they appear to be fixing something which is not broken.

The Solicitors Regulation Authority said that focus groups commissioned by it who heard from people who had instructed solicitors in financial services claims, generally for mis-sold pension schemes and investment, showed that there were “specific areas of complexity” and that clients had “positive experiences of their solicitors approach and representation” (Law Society Gazette, 31 March 2023).

The proposed rates are:

COMMENT

This is slippery slope. The SRA have power to discipline solicitors for exploiting clients, and their fining powers have just been massively increased, meaning that virtually all these matters could be dealt with by the SRA without them needing to prosecute before the Solicitors Disciplinary Tribunal.

The regulators should not be able to restrict agreements freely entered into by adults with full capacity.

Will the SRA now cap the fees that, for example, defendant insurance companies can pay their lawyers when fighting small firms of solicitors?

JG SOLICITORS COMPLAINTS: HOW TO FIGHT THEM – FREE ZOOMINAR!

Tuesday, 27 June 2023 at 4pm

Solicitors Act challenges of the type made by Checkmylegalfees and JG Solicitors Limited have effectively been stopped by the Court of Appeal’s decision in

Belsner v Cam Legal Services [2022] EWCA Civ 1387

as reported by me in the Kerry On Costs… And So Much More… Newsletter in

BELSNER: AN INTERESTING COURT OF APPEAL ORDER  and

BELSNER: SOME FURTHER THOUGHTS .

Since that decision, I have had no new matters from solicitors in relation to Checkmylegalfees.

The position is different re JG Solicitors Limited who are now getting former clients to instruct them to make complaints against solicitors, instead of the client contacting the solicitors direct as they should in accordance with the Solicitors Code of Conduct and the complaints policies of solicitors.

JG Solicitors Limited are demanding £400 costs and threatening solicitors with the Legal Ombudsman.

They are using standard letters, and do not refer to the date when the alleged complaint arose, presumably so as not to alert the Legal Ombudsman that claims are out of time, following the new one year time limit with effect from 1 April 2023.

It is in the interest of the profession and the wider public to put an end to this procedure, and consequently, I am presenting this Zoominar free of charge to anyone.

I have a significant number of matters on for solicitors where this tactic has been used by JG Solicitors, and will be able to help.

To take part, please contact me on kerry.underwood@lawabroad.co.uk or our Director of Marketing and Advertising, Claire Long on claire.long@lawabroad.co.uk.

COURT TAKES 4.5 MONTHS FOR 5 MINUTES WORK, BACKDATES CLAIM FORM MAKING IT IMPOSSIBLE TO SERVE AND REFUSES RELIEF

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In

Walton v Pickerings Solicitors and another [2023] EWCA Civ 602 (6 June 2023)

the claimant did everything correctly, that is attended the court office with all necessary copies of the claim form and paid the correct fee.

It is well established that service of an unsealed claim form is not good service, and therefore, the claimant could do nothing until the sealed claim form was received from the Court.

This involves the Court stamping and sealing the documents.

If I claimed more than one six-minute unit for doing that, my costs will be disallowed.

The Court took four months and 18 days to do this.

There is a strict time limit of four months for serving a claim form.

The claim form was in fact sealed between 30 November 2020 and 7 December 2020 and backdated by the Court to make lawful service utterly impossible.

So far, so bad.

The claimant served the claim almost immediately, just three days after receiving it and applied to extend time for service until that date.

That application was dismissed.

On appeal, the High Court held that it had discretion to extend time but declined to do so.

Thus, the Court takes four and a half months to do something that takes five minutes, makes it completely impossible for the claimant to comply with the law, and then the Court refuses to extend time, and so does the High Court.

The Court of Appeal rectified matters by declaring the court’s action in backdating the claim form unlawful.

This should be read in the context of the claim kicked out for inadvertent underpayment of £24 – written up by me under – COURT FEES: CASE THROWN OUT FOR A PRICE OF A COUPLE OF BEERS IN LONDON.

Is it me, or are the courts in this country going mad?