Kerry Underwood

WHAT FIXED COSTS ARE PAYABLE WHEN DIFFERENT PARTS SETTLE AT DIFFERENT STAGES?

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Suppose for example the vehicle damages aspect of a claim is settled for £2,000.00 out of the portal but pre-issue and the general damages claim settles for £5,000.00 post-allocation.

The fee for a matter settled post-allocation is £1,880.00 as the core fee plus 20% of damages. Thus in that example is it 20% of £7,000.00, being the total of the settlement sum, or is it 20% of £5,000.00 being the sum settled at that stage?

A case settled pre-issue for between £1,000.00 and £5,000.00 attracts a fee that is the greater of £550.00 or £100.00 plus 20% of damages.

Thus in the example given a fee for settlement of the £2,000.00 element pre-issue would be £550.00 as that is the minimum, but arguably the claimant has then effectively got two core fees.

In that particular example the claimant would receive more costs because part of the claim was settled early. That seems to make little sense.

Examples:-

 Fee payable
In relation to the settlement pre-issue of £2,000.00, the fee would be:£550.00
Balance of £5,000.00, the fee would be£1,880.00
20% of damages£1,000.00
Overall total£3,430.00

However if the correct analysis is that the whole of the £7,000.00 comes into play at the post allocation period then the calculation would be:-

 Fee payable
Balance of £7,000.00 would be: £1,880.00
20% of damages£1,400.00
Overall total£3,280.00

However let us turn that around and assume that the £5,000.00 element was settled pre-issue and the £2,000.00 element post-allocation.

The calculation is then as follows:-

Pre-issue costs of £100.00 plus 20% of damages£1,100.00
Post-allocation costs of  £1,880.00 plus 20% of damages of £2,000 (£400.00)£2,280.00
Total£3,380.00

Again the claimant is getting more because part of the claim settles early and that does not seem logical.

Clearly fixed costs are structured on the basis of a fixed core cost plus a percentage of damages. The fixed core cost is to represent the fact that there is a minimum amount of work in any case.

The potential effect is that if different parts of the claim are settled at different stages then the claimant could get the core costs several times over.

On the other hand if no fee is payable in respect of the first payment then surely the value of that payment must be taken into account later on as otherwise the claimant will get nothing for the work done in relation to the earlier settled aspect of the claim.

For example if there is a £100,000.00 claim, of which £80,000.00 is vehicle related damage and that element settles pre-issue and the £20,000.00 element settles later and costs paid on the basis of that £20,000.00, then the claimant’s solicitors would have recovered £80,000.00 and received no costs.

Thus it seems likely that one takes the later stage at which any part of the claim was settled but then uses the total settlement figure, whenever those elements have been settled.

However it appears that nothing settled in the portal comes into play.

On a high value claim this can have a significant effect.

Let us take the £100,000.00 claim, of which £80,000.00 is vehicle related damage. There is no doubt that such a claim goes into the portal and therefore goes into the Fixed Costs Regime.

If the £20,000.00 aspect is settled pre-issue and the £80,000.00 aspect settled post-allocation then the calculation is as follows:-

Pre-issue element£1,930.00 plus 10% of £10,000.00 (damages over £10,000.000)£2,930.00
Post-allocation£1,880.00 plus 20% of damages (£80,000.00)£17,880.00
Total £20,810.00

Turn that around the other way:-

Pre-issue element£1,930.00 plus 10% of £10,000.00 (damages over £70,000.000)£8,930.00
Post-allocation£1,880.00 plus 20% of damages (£20,000.00)£5,880.00
Total £14,810.00

If part of a claim is resolved within the portal then the portal costs are payable for that element and only the unresolved balance is subject to fixed costs and that was confirmed in the case of

Bewicke-Copley v Ibeh, Oxford County Court, 029YJ613, 4 June 2014

where most of the claim had been resolved in the portal leaving the balance, which was not resolved in the portal, as below the small claims limit.

The judge held that no costs were payable in relation to that balance as it was below the small claims limit and the solicitors had been paid in the portal for the resolved element.

All of this will be of greater significance once fixed costs cover everything up to £250,000.00.

The key point is that Fixed Costs are far from fixed.

Written by kerryunderwood

June 21, 2022 at 2:05 pm

Posted in Uncategorized

NO RIGHT TO TRIAL IN CLAIMS OF £10,000 OR LESS FROM 1 JUNE 2022

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The 143rd Practice Direction Update introduces the small claims paper determination pilot with effect from 1 June 2022 in the following County Courts:

  • Bedford
  • Luton
  • Guildford
  • Staines
  • Cardiff
  • Manchester

The details are in Practice Direction 51ZC which is here.

My Tweets in relation to this subject have provoked considerable debate, including the constitutional position, that is how Practice Directions are made.

The answer is that they are made under Schedule 2, Part 1, paragraphs 2 and 3 of the Constitutional Reform Act 2005 which reads:

2 (1) It is for the Lord Chief Justice, or a judicial office holder nominated by the Lord Chief Justice with the agreement of the Lord Chancellor, to make or give designated directions.

(2) The Lord Chief Justice may nominate a judicial office holder in accordance with sub-paragraph (1)—

(a)          to make or give designated directions generally, or

(b)          to make or give designated directions under a particular enactment.

(3) In this Part—

(a)  “judicial office holder” has the same meaning as in section 109(4);

(b)    references to the Lord Chief Justice’s nominee, in relation to designated directions, mean a judicial office holder nominated by the Lord Chief Justice under sub-paragraph (1) to make or give those directions.

3 (1) The Lord Chief Justice, or his nominee, may make or give designated directions only with the agreement of the Lord Chancellor.

(2) Sub-paragraph (1) does not apply to designated directions to the extent that they consist of guidance about any of the following—

(a) the application or interpretation of the law;

(b) the making of judicial decisions.

(3) Sub-paragraph (1) does not apply to designated directions to the extent that they consist of criteria for determining which judges may be allocated to hear particular categories of case; but the directions may, to that extent, be made or given only after consulting the Lord Chancellor.

(4) If sub-paragraph (1) applies but the Lord Chancellor does not agree designated directions made or given by the Lord Chief Justice, or by his nominee, the Lord Chancellor must give that person written reasons why he does not agree the directions.

Section 1 of the act reads:

1              The rule of law

This Act does not adversely affect—

(a)          the existing constitutional principle of the rule of law, or

(b)          the Lord Chancellor’s existing constitutional role in relation to that principle

Cynics may feel that that is a somewhat Orwellian statement.

As we have seen this huge constitutional, and highly controversial, change that was introduced by the 143rd Practice Direction and I set out below the signature page, showing how this was done.

The Minister who signed it off was Lord Wolfson, a Parliamentary Undersecretary for Justice sitting in the House of Lords, and with due respect, a relatively Junior Minister, who, with rich irony, has since resigned from the government over the Rule of Law and lockdown parties in Downing Street – some may feel abolishing the right to trial is a more serious breach of the rule of law.

Thus, this is barely secondary legislation, in that it is not approved by a Statutory Instrument or a Local Authority or whatever, but is a power exercised under delegated powers, and thus the Right to a Trial has been removed by delegated powers to a Senior Judge and a Junior Minister, albeit with approval by the Lord Chancellor.

This unquestionably means that the High Court has the power to strike down the Practice Direction as being in breach of the Human Rights Act 1998, in particular the Right to a Fair Trial under Article 6 of the European Convention on Human Rights.

It is to be hoped that they do so.

The pilot is due to operate for two years until 1 June 2024, but note that the Damages Claims Online Pilot, was due to run until 30 April 2024, but was made compulsory from 4 April 2022, more than two years early.

The only excluded claims are housing disrepair claims and claims where the parties have followed the Pre-Action Protocol for Personal injury claims below the Small Claims Limit in Road traffic Accidents, and where proceedings have been started under Practice Direction 27B.

It has been widely reported that the pilot does not apply to personal injury claims in generally.

That is not correct – all personal injury small claims, except those that have gone on to the Road Traffic Accident Small Claims Portal, are within the scheme.

The key point is that in such cases the right to a trial is lost and the court can direct that a small claim be determined without a hearing of any kind, and this will not require the consent of the parties.

It will not apply to existing proceedings, but will continue to apply after the end of the Pilot Period to any proceedings listed for termination without a hearing during the Pilot Period.

Paragraph 4.4 sets out matters, which may be “suitable” but appears to give the court unfettered discretion to order any claim in the Small Claims Track, which is not a Road traffic accident small claim portal claim, or a housing disrepair claim, to be determined without a trial.

The scheme, it has been misreported that the pilot only applies to claims under £1,000.

That is not correct; it covers all small claims, as is apparent from the Practice Direction itself, and the fact that the new Form N180 Directions Questionnaire (Small Claims Track) does not distinguish between claims of under £1,000, or those above, in relation to the questions concerning the new Paper Determination Pilot.

There is no right to seek a review or to have judgment set aside under CPR 27.11.

Permission to appeal may be sought under CPR 52.3.

Consequently, there is no appeal as of right, but permission is required.

The Ministry of Justice has lied about this scheme, denying that it is removing a litigant’s right to a trial, when very obviously it does.

The denial is contained here in the Law Society Gazette’s piece of 13 May 2022 –

MoJ denies new pilot scheme removes right to trial

The Government said that there are safeguards in place to allow those who want their day in court to have it, but that is simply not true, and that position would have been achieved by maintaining the current position, which is that a paper only hearing requires the consent of both parties.

A party who wants their day in court cannot have it if the judge finds that the matter is suitable for a Papers only trial.

I refer above to the misreporting that the pilot only covers claims under £1,000, and the Ministry of Justice accept that that was not the case and said that it was “mostly going to apply to cases worth less than £1,000”, but accepted that it applied to all claims up to £10,000, with the exception of the exceptions set out above.

It would have been the simplest thing in the world to open the Practice Direction with the words:

“This Practice Direction only applies to claims valued at £1,000 or less.”

Shamefully, the Law Society has not condemned the scheme but merely said:

“There is a balance to be struck in these cases. Proceedings must always be resolved fairly, but this should be done in as cost-effective a manner as possible”

Quite how the Law Society will assess whether there is a reduction in the quality of justice delivered is not clear.

Presumably they are not going to retry all the matters.

NEW FORM N180 – DIRECTIONS QUESTIONNAIRE (SMALL CLAIMS TRACK) WITH EFFECT FROM 1 JUNE 2022

A sample

Amended Form N180 Directions Questionnaire (Small Claims Track)

has now been uploaded to the Justice.gov.uk homepage.

The revised form replaced the current Form N180 with effect from Wednesday, 1 June 2022 to reflect the wider amendments consequent upon reforms concerning vulnerable parties and witnesses, as well as the introduction of Practice Direction 51ZC, the Small Claims Paper Determination Pilot.

Thus, there is a new section D, intitled “Suitability for Determination Without a Hearing”, which requires each party to indicate whether they consider that the claim is suitable for determination without a hearing and, if not, to give reasons why.

There is a new question E5, which asks whether the party, or a witness appearing on behalf of that party, is vulnerable in any why which the court needs to consider, and if so, the party must explain in what way they or their witnesses are vulnerable, and what steps, support or adjustments they wish the court and the judge to consider.

The new form also contains a reminder that the completed form must be sent to all the parties in the case, as well as the court.

Written by kerryunderwood

June 10, 2022 at 11:53 am

Posted in Uncategorized

PART 36 AND LATE ACCEPTANCE: PROTECTED PARTIES LOSE OUT: URGENT LEGISLATION NEEDED

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In

MRA v The Education Fellowship Limited [2022] EWHC 1069 (QB)

a High Court Master held that the normal Part 36 consequences should apply in a case where a claimant had won a claim in relation to historic child sexual abuse and had accepted the defendant’s Part 36 offer over two years after it had been made.

The claimant had argued that it would be unjust to make the usual order because the late acceptance was due to an uncertain prognosis, but the court found in favour of the defendant, that is that the normal rule should apply with the claimant paying the defendant’s post expiry costs.

The effect is that the claimant will lose around £45,000 in costs of the £80,000 settlement.

One of the issues that the case threw up was the severe disadvantage that minors and those lacking capacity are now under in relation to late acceptance of Part 36 offers.

It is well established that a defendant can only set-off its costs on late acceptance of a Part 36 offer in a personal injury case where there has been a judgment or order for damages, and this is due to the system of Qualified One-Way Costs Shifting and the decision in

Cartwright v Venduct Engineering Ltd [2018] EWCA Civ 1654 (17 July 2018)

I wrote this up in my piece

PART 36: PERSONAL INJURY: NO COSTS CONSEQUENCES FOR LATE ACCEPTING CLAIMANT

which appears in Issue 49 at pages 255-257 of Kerry On Costs… And So Much More..

The point is, as the court recognized here in paragraph 40 of its Judgment, that if the claimant had not been a minor or a person lacking in capacity, you would not need an order of the court approving the payment of damages, and therefore there could be no set-off.

In her decision on this point, the Master came to no conclusion:

65. I am not here going to decide the effectively ‘parked’ argument which was mooted at the outset of both days of hearing to the effect that there were differences in treatment of protected parties versus non-protected parties which rendered them more exposed to the situation here under QOCS. This was not fully argued before me even though it was listed in the Claimant’s counsel’s final comments summing up types of possible injustice in the case, but in circumstances where the issues had not been fully ventilated. If it is thought that that line of argument might change the position here, then that can be heard in due course. I will also not determine the question whether (if the rule here would work an injustice) it would be possible or proper for me to then explore a means of approving an order drafted so as to avoid that alleged difference in treatment, if there is one, which was not argued but which I am aware would certainly be opposed by the Defendant as tantamount to being improper as a device to avoid the rule.

Comment

We now have the ludicrous position where a rule that exists for the sole purpose of protecting vulnerable clients, that is minors and those lacking capacity, whereby there is a requirement for an Order of the Court approving the settlement, wipes out part, or indeed all, of that vulnerable person’s damages.

The effect is vividly demonstrated here.

Had the claimant had capacity then she/he would have recovered £80,000.

As an Order of the Court was required approving the settlement, obviously an order came into place, meaning that the defendant could set-off the post-Part 36 costs against the damages meaning that they were reduced to £35,000.

Summary

Full capacity – court approval and protection not required: result £80,000

Lacking capacity: court approval and protection necessary: result £35,000.

Some protection.

This is madness and the law should be changed as a matter of urgency.

Written by kerryunderwood

June 9, 2022 at 11:23 am

Posted in Uncategorized

DAMAGES CLAIMS ONLINE PORTAL COMPULSORY FOR ALL LAWYERS FROM 2 JUNE 2022

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With almost no notice at all, Her Majesty’s Courts and Tribunals Service ordered that with effect from Monday, 4 April 2022, legal professionals issuing claims for damages that fall under the scope of Practice Direction 51 ZB must use the damages claim service on MyHMCTS and indeed Practice Direction 51 ZB itself was further updated on 7 April 2022.

Subsequently the government announced a grace period, but that expired on 29 April 2022, so use of the Portal is now compulsory.

If a solicitor seeks to issue in any other way, then the court will return the matter unissued and the fact that the papers were sent to the court will not affect the running of time for limitation purposes.

The Practice Direction is here, and is lengthy.

This was a pilot that had been in operation since May 2021, and was supposed to run until 30 April 2024, but has been made compulsory and permanent more than two years early.

Legal professionals acting for claimants must use it, and guidance, and how to sign up, is here.

HM Courts and Tribunal Service has published a leaflet – Damages Claims Online Portal – Digital Service for Unspecified Damages Claims, which is here.

Claims under Practice Direction 27B, that is the Pre-Action Protocol for Personal Injury Claims below the Small Claims Limit in Road Traffic Accidents, are excluded, but are subject to a fully online procedure under that Practice Direction.

With effect from 2 June 2022, it will be compulsory for defendants who are legally represented to use the Damage Claims Online Portal, and this includes a legal requirement for the defendant’s legal representative to register with MyHMCTS  and the link on how to sign up is above.

This will be achieved by the 145th Practice Direction Update to the Civil Procedure Rules, but this has not yet been published and is subject to approval by the Master of the Rolls and signature by a Minster in the Ministry of Justice.

Thus, from 2 June 2022, all of those representing parties who are making or defending unspecified money claims in the County Court must use the Damages Claims Portal, provided that the matter is in scope as set out below.

HMCTS has prepared a webinar demonstrating the damages claims service and that is on YouTube, and is here and is just over 20 minutes long, and easy to follow.

Paragraph 1.6 of Practice Direction 51ZB sets out the matters that are suitable for the scheme.

(1) The conditions for using the pilot are set out in sub-paragraph (3).

(2) If all of the conditions in sub-paragraph (3) are met—

(a) the claimant’s legal representative must register with MyHMCTS and secure access to the DCP before the claim is started; and

(b) the claim must be started using the procedure set out in this Practice Direction.

(3) The conditions referred to in sub-paragraph (1) are—

(a)   the claim is a claim for damages only;

(b)   the claim would not ordinarily follow the Part 8 procedure;

(c)   the claim is not made under one of the provisions of the Consumer Credit Act 1974 specified in CPR PD 7B paragraph 3.1;

(d)  the claimant is represented by a legal representative;

(e)  if an individual, the claimant is aged 18 years or over, or is under 18 and has a litigation friend (in which case a statement of suitability must be provided);

(f)     the claimant is not a protected party within the meaning of CPR 21.1(2)(d);

(g)   the fee for issuing the claim is paid in full using the “Payment By Account” system;

(h)   the claim is conducted in English;

(i)     the claimant does not have in force against them—

(i)       a civil proceedings order;

(ii)      an all proceedings order; or

(iii)    a civil restraint order;

(j)     the claimant believes that the defendant—

(i)     has a postal address for service within England and Wales;

(ii)  if an individual, is aged 18 years or older; and

(iii)  is not a protected party; and

(iv) is not the Crown;

(k) the claim is not one to which Practice Direction 27B applies; and

(l) the claim—

(i) is brought by one claimant against either one or two defendants; or

(ii)  is brought by two claimants against one defendant

The 141st Practice Direction update repeals the County Court Online pilot under Practice Direction 51 S, as this is entirely replaced by the Damages Claims Online Portal.

Court Fee Remission

At present the portal does not allow an application for court fee remission to be made at the same time as issuing a claim and HMCTS has stated

“The Damages Claims Portal does not have functionality to allow a HwF application to be made at the time of issuing a claim.

If the Claimant is acting in person then they would issue via the paper route as the DCP does not accept claims issued by Litigants.

If the claimant is represented then the fee would be paid by the representatives and a retrospective HwF application would need to be made to reclaim the fee.”

Other Points to Note

Section 1.4 specifically states that insofar as the contents of the Practice Direction are in conflict  with any other provision of the Civil Procedure Rules, or another Practice Direction, then this Practice Direction takes precedence.

Notification and Service

Sections 3 and 4 are a little confusing, but essentially preserve and make express the general situation in litigation, except that there is no automatic strike out for late service in general litigation, where as there is under this portal.

Section 3 deals with notifying the claim to the defendant, basically serving the Claim Form, and that must take place within four months and in default the action  is struck out; any application for an order extending time is considered under CPR 7.6.

Section 4 is the Particulars of Claim stage and these must be served on the earlier of the two dates:

1.           the four month period following issue;

2.           the 14th day after notification (service) of the Claim Form.

The rule dealing with an extension of time for serving the particulars of claim, dealt with at paragraph 4.6, does not state that it is governed by CPR 7.6.

In summary:

  1. the “Claim Form” has to be served within four months and any application for an extension is dealt with under CPR 7.6;
  2. the “Particulars” have to be served within four months of issue, or within 14 days of the “Claim Form” being served, whichever is the earlier, or the claim is struck out.

I am grateful to Gordon Exall of Civil Litigation Brief for assistance with this piece.

Written by kerryunderwood

May 16, 2022 at 12:58 pm

Posted in Uncategorized

NO RIGHT TO TRIAL IN CLAIMS OF £10,000 OR LESS FROM 1 JUNE 2022

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The 143rd Practice Direction Update introduces the small claims paper determination pilot with effect from 1 June 2022 in the following County Courts:

  • Bedford
  • Luton
  • Guildford
  • Staines
  • Cardiff
  • Manchester

The details are in Practice Direction 51ZC which is here.

The pilot is due to operate for two years until 1 June 2024, but note that the Damages Claims Online Pilot, was due to run until 30 April 2024, but was made compulsory from 4 April 2022,more than two years early.

Certain claims, such as personal injury and housing disrepair, are excluded from the pilot scheme.

The key point is that in such cases the right to a trial is lost and the court can direct that a small claim be determined without a hearing of any kind, and this will not require the consent of the parties.

It will not apply to existing proceedings, but will continue to apply  after the end of the Pilot Period to any proceedings listed for termination without a hearing during the Pilot Period.

Paragraph 4.4 sets out matters, which may be “suitable” but appears to give the court unfettered discretion to order any claim in the Small Claims Track, which is not a personal injury claim or a housing disrepair claim , to be determined without a trial.

There is no right to seek a review or to have judgment set aside under CPR 27.11.

Permission to appeal may be sought under CPR 52.3.

Consequently, there is no appeal as of right, but permission is required.

Amended Form N180 Directions Questionnaire (Small Claims Track) will be available online at Gov.uk before 1 June 2022 and will include a section requiring each party to indicate whether they consider that the claim is suitable for determination without a hearing and, if not, to give reasons why.

Written by kerryunderwood

May 12, 2022 at 9:46 am

Posted in Uncategorized

FIXED RECOVERABLE COSTS EXTENSION: TRIGGER DATE

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The new regime, due to come in on 3 October 2022, will require a claimant, when sending a Letter of Claim, to indicate the track and band that they think the matter should go into, as well as sending the usual information that has to go in a Letter of Claim.

The defendant, in its response, then has to state its view of the track and band.

Consequently, there is a real likelihood that the key date in determining whether or not a matter goes into the new regime may be the Letter of Claim, as compared with the issue of proceedings.

From 4 April 2022, all damages only claims in the County Court, where solicitors are instructed, must be issued online only as set out in Practice Direction 51 ZB.

Given that the proposed start date for the extension of fixed recoverable costs is 3 October 2022, it may be that more complex cases coming into the office now where a Letter of Claim cannot be sent until after that date, will indeed be caught.

An example is clinical negligence, which will be subject to a different costs matrix, and where the Letter of Claim has to attach experts’ reports, as well as other information. Clearly, there will be clinical negligence cases coming into the office now where it may not be possible to send the Letter of Claim until after the new clinical negligence regime comes in, although that is not due until 2023.

However, if a potential claimant has already sent a letter of claim and then not gone ahead, I think that there is no prospect at all of a defendant being allowed to seek costs.

It would be sensible to inform the defendant in those cases that your client is not going ahead, so as to unquestionably close the matter off now.

Should a client change their mind, they still have the usual limitation period in which to issue proceedings, generally six years outside the field of personal injury.

The Civil Procedure Rules have not yet been published, but that would appear to be the position in relation to the new system, that is that you could send the letter of claim and not proceed, and pay the defendant’s costs, and still be able to issue proceedings within the relevant limitation period, after sending a fresh Letter of Claim.

A court could take the view that that is an abuse of process, but it may be that the new Civil Procedure Rules will clarify that point.

In short, solicitors have nothing to worry about in relation to cases where they have already sent the Letter of Claim and discontinued.

Having said that, if there are any matters where a Letter of Claim has been sent, and no action taken, and proceedings issued after the new scheme comes in, then it is possible that they may be caught.

The main effect in relation to the new scheme is in general civil litigation, in the sense that sub £25,000 personal injury claims have been covered by fixed recoverable costs for many years, and in general civil litigation, the limitation period is six years , and normally there is less information to be sent with the Letter of Claim as such cases normally deal only with special damages and not general damages.

I do not think that the rules will allow the parties to get Letter of Claims out before 3 October 2022,and then take no action, potentially for nearly six years, and still be on the existing regime of open, standard costs.

Written by kerryunderwood

April 8, 2022 at 9:18 am

Posted in Uncategorized

GUIDELINE HOURLY RATES APPLY UNLESS “CLEAR AND COMPELLING JUSTIFICATION” FOR EXCESS

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In

Samsung Electronics Co. Ltd & Ors v LG Display Co. Ltd & Anor (Costs) [2022] EWCA Civ 466 (06 April 2022)

the Court of Appeal, summarily assessing on the standard basis, allowed Guideline Hourly Rates, pointing out that London 1 rates specifically covered “very heavy commercial and corporate work by centrally based London firms”.

The court said that the guide recognizes that in substantial and complex litigation an hourly rate in excess of the guideline figurers may sometimes be appropriate, giving as examples “the value of the litigation, the level of the complexity, the urgency or importance of the matter, as well as any international element.”

However, it is important to have in mind that the guideline rates for London 1 already assume that the litigation in question qualifies as “very heavy commercial work”. (Paragraph 4 of the Judgment)

In

Various Airfinance Leasing Companies & Ors v Saudi Arabian Airlines Corporation [2021] EWHC 3509 (Comm) (20 December 2021)

the Commercial Court, part of the High Court, came to exactly the same conclusion in a heavy weight commercial case, but where costs had been awarded on the indemnity basis.

Thus this current Court of Appeal decision is most definitely not a one-off on the particular facts, but is very clearly, in a one page Judgment, telling lawyers that on a between the parties basis they will rarely get any rate above London 1, which is £512 per hour for a Grade A fee earner.

The Various Airfinance case applies that, even on the indemnity basis.

The significance of that is that if the client in v Various Airfinance was charged the full amount, then they will be bound to win a Solicitors Act assessment, as the High Court has already fixed the level of indemnity costs, the basis on which Solicitor Act 1974 assessments are conducted, and that is that.

I wrote about that in my piece –

ONLY GUIDELINE HOURLY RATES ALLOWED EVEN ON INDEMNITY BASIS IN HEAVY WEIGHT COMMERCIAL CASE

True it was that these were summary assessments, but that is the starting point in all cases now, and set out below paragraph 2 from the 2021 Guide to the Summary assessment of costs:

WHEN A SUMMARY ASSESSMENT SHOULD BE MADE

2. The court should consider making a summary assessment whenever it makes an order for costs which does not provide only for fixed costs. The general rule is that the court should carry out a summary assessment of the costs:

(a)   at the conclusion of the trial of a case which has been dealt with on the fast track, in which case the order will deal with the costs of the whole claim; and

(b)   at the conclusion of any other hearing which has lasted not more than one day, in which case the order will deal with the costs of the application or matter to which the hearing related. If this hearing disposes of the claim, the order may deal with the costs of the whole claim.

This represents a significant change from the previous guides, and indeed Practice Direction 44.9.2 has not yet been amended to take note of it.

It is, as they say, a matter for you, but any lawyer in the land who fails to advise their client that they are very unlikely to recover more than the Guideline Hourly Rates from the other side, is also very unlikely to recover any of the excess costs from their own client.

Written by kerryunderwood

April 7, 2022 at 11:05 am

Posted in Uncategorized

PART 36, FIXED COSTS AND ACCEPTANCE OF LOW OFFERS

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The last of Kerry’s four Zoominars on costs is a general Costs-Round up tonight at 4pm and you can book here, and order videos of Zoominars to date, including the Part 36 one.

A well-recognized problem with the current Part 36 regime is that, in circumstances where a claimant accepts a Part 36 offer which is far lower than the sum they claim, then the get full costs, which are disproportionate to the amount settled for, if not in relation to the original claim.

This often deters paying parties from making Part 36 offers, and making Calderbank offers instead, which is neither fair nor satisfactory.

All of that changes with the new fixed recoverable costs scheme coming in in October 2022 for virtually all civil claims valued at £100,000 or less.

The new system is that the claimant is at risk of costs based on the amount claimed, whereas the defendant pays costs by reference to the settlement figure, or the amount ordered by the court.

The new situation is best illustrated by a specific example.

The claimant claims £100,000 and the matter goes into Band 4 and the defendant’s Part 36 offer of £20,000 is accepted after disclosure and inspection but before service of Witness Statements and Expert Reports.

On the basis of the claim being worth £100,000 the figures will be as follows:

 £
Fixed element17,400
18% of £100,00018,000
Total35,400

However, on acceptance of an offer of £20,000, the position is as follows:

 £
Fixed element17,400
18% of £20,0003,600
Total21,000

On exactly the same figures, but in Band 1, the picture is as follows:

On the basis of £100,000

 £
  
Fixed element4,500
12% of £100,00012,000
Total16,500

Settled at £20,000

 £
Fixed element4,500
12% of £20,0002,400
Total6,900

It will be interesting to see the interplay between accepting an offer that is a faction of the amount of the claim and unreasonable conduct, which warrants a 50% cost penalty.

Traditionally, the rules and the judiciary have been reluctant to punish a party upon acceptance of an offer, as this could mean the party being better off carrying on and losing.

This was illustrated most graphically in Employment Tribunal claims, where there are generally no costs either way, where it was proposed that a claimant be punished in costs for withdrawing the claim within 28 days of the trial.

Many of us pointed out that in those circumstances the claimant would be better going ahead and losing, and the proposal was dropped.

In March 2022, the Ministry of Justice abandoned similar proposals in relation to Qualified One Way Costs Shifting, that is that potentially it would not apply if the claimant abandoned the claim within 28 days of trial.

This is a different scenario, as a claimant who went ahead and lost at trial would face further costs, and of course could still be found to have acted unreasonably.

The argument would be that it is not the acceptance for low Part 36 offer that is unreasonable conduct, but exaggerating the claim in the first place.

Written by kerryunderwood

March 29, 2022 at 2:02 pm

Posted in Uncategorized

PART 36: WITHDRAWN OFFER STILL COUNTS: AN UNFORTUNATE DECISION

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The last of Kerry’s four Zoominars on costs is a general Costs-Round up tonight at 4pm and you can book here, and order videos of Zoominars to date, including the Part 36 one.

An issue that came up in the recent- March 2022-  Part 36 Zoominar was what status a withdrawn Part 36 offer had, and whether its existence could be taken into account for the purposes of costs, if not the other potential enhancements.

The court will have greater flexibility from October 2022 onwards, as in the new Fixed Recoverable Costs regime, covering civil cases up to £100,000, it will have the power to award a 50% penalty or uplift on fixed recoverable costs, to reflect unreasonable litigation conduct.

Clearly failure to accept an offer, even if subsequently withdrawn, could amount to such conduct.

These points were considered in the context of the existing regime, in the case of

Blackpool Borough Council v Volkerfitzpatrick Ltd [2020] EWHC 2128 (TCC)

 where the Technology and Construction Court, part of the High Court, considered the correct approach to costs where a Part 36 offer has been withdrawn and where the claimant recovers less at trial than had been on offer in the withdrawn offer.

It was common ground that the automatic consequences of Part 36 do not apply to a withdrawn offer – see CPR 36.17(7)(a).

However, the offer may still be taken into account under the general costs provisions in CPR 44, specifically CPR 44.2(4)(c), with the key issue being whether the recipient of the offer acted reasonably in rejecting it when it was available – see

Thakkar v Patel [2017] EWCA Civ 117.

Here, the court held that the claimant did indeed act unreasonably in not accepting the defendant’s Part 36 offer, which was subsequently withdrawn, and ordered the successful claimant to pay 80% of the defendant’s costs after the expiry of the 21 day period for accepting a Part 36 offer.

The judgment here also sets out how the court should consider the reasonableness of rejecting, or failing to accept, Part 36 offers which are subsequently withdrawn.

The court should put itself in the position of the claimant at the time of the offer and not judge the case with hindsight.

The court should consider the reasonableness of the non-acceptance, taking into account the facts and matters relating to the merits of the claim as they ought reasonably to have appeared to the claimant at that time, and not by reference to wider commercial factors.

Here, the claim was for £6.7 million in relation to a tram depot and the claimant won on six out of seven matters, but recovered only £1.1 million, with the awards on many of the successful elements of the claim being cut sharply, in one case by over 90%.

The court held that it was unreasonable for the claimant not to accept the Part 36 offer as it knew, or had been in a position to know, that its case had been significantly weakened by test results and therefore there was a real risk that it would fail to beat the offer.

The claimant had taken a commercial risk.

The defendant was awarded 80% of its costs in relation to the subject matter of the Part 36 offer from 21 days after its service.

Comment

With respect, the court here appears to have got confused between disallowing a successful party’s costs, and indeed ordering them to pay part of the other side’s costs, and Part 36.

Absent any Part 36 offer, it is almost inconceivable that the claimant here would have recovered all of its costs, by virtue of the facts set out above.

It is also true that the court has a very wide discretion in CPR 44 in relation to costs.

However, it cannot be right that a withdrawn Part 36 offer should ever get anywhere near having the same consequences as an offer capable of acceptance.

Here, the claimant had to plough on, as once the offer was withdrawn, there was no offer to accept, and no way that the claimant could end its claim, which did, after all, result in an award of £1.1 million.

The defendants here have been allowed to eat their cake and still have it, that is to be at no risk of any offer being accepted after it was withdrawn, but, for all intents and purposes, getting the full protection in costs of Part 36.

This is open to heavy abuse. A defendant makes a Part 36 offer very early on in the case, and almost immediately withdraws it. Thus, if the claimant accepts the offer then that is that and the defendant is liable for limited costs as the offer has been made very early on.

Why, in those circumstances, should the defendant then get protection in relation to potentially millions of pounds of costs incurred when the other party had no mechanism for ending the case, short of discontinuance, when it would also be liable for the defendant’s costs?

Part 36 is difficult enough anyway, and I understand the logic of a court having to take into account a non-Part 36 offer, such as a Calderbank offer, as such offers give more flexibility than Part 36 and may be entirely reasonable in the particular circumstances of the case.

However, I see no justification whatsoever for a withdrawn Part 36 offer ever being taken into account in relation to costs.

This decision should be overturned on appeal.

I also wrote about this issue in the context of a revised offer, and whether this had the effect of withdrawing the original offer.

Withdrawal And Revision of Original Offer

This scenario is the real facts of an ongoing case.

In a personal injury claim the defendant made a Part 36 offer of £75,000 in April 2018.

In January 2019 the defendant made a revised Part 36 offer of £25,000 and was granted permission to serve an amended defence pleading fundamental dishonesty.

The revision to the Part 36 offer was made by amending the original form N242A, crossing out the figure of £75,000 and inserting the figure of £25,000 and crossing out the previous date of April 2018 and redating the offer 7 January 2019.

The provision allowing 21 days for acceptance remained as in the original Part 36 offer and this revised offer of £25,000 was accepted within 21 days.

The claimant argues that costs are payable up to the date of acceptance in January 2019, on the basis that the claimant is entitled to rely on the clear wording of the revised Part 36 offer and the fact that it was accepted within 21 days.

Had the defendant not wished to pay costs up to the date of acceptance, then the defendant should have made Calderbank offer to that effect.

That was the effect of the decision in

Ballard v Sussex Partnership NHS Foundation Trust [2018] EWHC 370 (QB).

The defendant argues that that case is not relevant because it relates to a withdrawn offer, rather than a revised offer and refers to the case of Burrett v Mencap Limited 14 May 2014,  where an offer was varied, rather than withdrawn, although in that case the variation was deliberately silent as to the time limit for acceptance and so when accepted the costs consequences ran from the original offer, rather than the revised one.

Burrett v Mencap Limited was in any event decided under the Civil Procedure Rules in force in 2014 and in April 2015, CPR Part 36 was extensively revised and new CPR 36.9 and 36.17 filled the gap identified in Burrett, which was in any event a first instance decision of a District Judge.

What Part 36 says, in difficult language, is that if the offer is revised by improving it, then the offeree, that is the claimant in this case, has 21 days from that revised offer to accept it.

That makes sense. Otherwise a defendant could make a ridiculously low offer of say £2,000 at the outset of the case, knowing full well that it will never be accepted, but subsequently make a perfectly acceptable offer of say £100,000 years later, but with the benefit of the offer being treated as being made at the beginning, with the defendant getting all of its costs from the date of expiry of the unacceptably low offer.

However, Part 36 is silent as to what happens the other way around, that is when an offer is revised downwards and then accepted.

It may be that this was never envisaged, as obviously the starting point would be that if a claimant is not prepared to accept, as here, an offer of £75,000, then why should it accept an offer of £25,000?

That would suggest that the clock does indeed run from the time of the first offer, and again there is logic in that.

After all, if an offer is revised downwards from £75,000 to £25,000, then all the claimant has to do to avoid the Part 36 consequences is to beat that offer of £25,000, whereas before revision the claimant would have had to beat the offer of £75,000.

Thus although the offer is much less attractive on the face of it in a normal case, the risks to the claimant are very much lower.

If the original offer is not withdrawn by the new offer, then the old offer remains capable of acceptance, which on the face of it is absurd, but the courts have consistently held that Part 36 is a self-contained code which is not subject to the usual rules of contract.

For example, as a matter of contract, a counter-offer amounts to a rejection of the original offer, but that is not the case with Part 36.

Thus if a claimant makes a Part 36 offer of, say, £30,000, and a defendant counter-offers at £20,000, that is not a rejection of the claimant’s Part 36 offer, which remains open for acceptance by the defendant, in contrast with the position in contract at common law.

Either the second offer must operate as a withdrawal of the initial offer, or the initial offer must still be open for acceptance.

It must indeed be one or the other, and the defendant’s contention that neither applies, must be wrong.

Could the claimant in these circumstances accept the original offer and argue that he is in entitled to £75,000?

That may encourage the defendant to agree that the true position is that that original offer has been withdrawn, which should then make it a simple matter of an acceptance of the subsequent offer of £25,000 in the usual way, with the usual costs consequences following, as though the original offer had never been made, and of course that is the effect of a withdrawn offer.

What CPR 36.17(7) actually says is:

“(7)

Paragraphs (3) and (4) do not apply to a Part 36 offer—

(a) which has been withdrawn; 

(b) which has been changed so that its terms are less advantageous to the offeree where the offeree  has beaten the less advantageous offer;

(c) made less than 21 days before trial, unless the court has abridged the relevant period.”

(8)

Paragraph (3) does not apply to a soft tissue injury claim to which rule 36.21 applies.

(Rule 44.2 requires the court to consider an offer to settle that does not have the costs consequences set out in this Section in deciding what order to make about costs.)”

Thus the costs consequences do not apply to a Part 36 offer which has been withdrawn.

Obviously, that is an issue in this scenario but the defendants are saying that the offer has been revised and not withdrawn.

CPR 17(7)(b) provides that the costs consequences do not apply to a Part 36 offer:

which has been changed so that its terms are less advantageous to the offeree where the offeree has beaten the less advantageous offer;”

What Part 36.17(7)(b) deal with is the position where the claimant beats that less advantageous offer, and so in this case that would involve achieving more than £25,000.

The rest of 36.17(7) is not relevant here.

There is a further problem with CPR 36.17(7) in that it clearly envisages, as a different concept, an offer which has been withdrawn – CPR 36.17(7)(a) – and an offer which has been changed so that its terms are less advantageous to the offeree… – CPR 36.17(7)(b).

If the effect of any downwards revised offer is to withdraw the original offer, then (a) appears to be otiose, as the circumstances in (b) would constitute the withdrawal of the original offer in any event.

Thus the claimant should accept the original offer.

That would of course be a late acceptance meaning that the client would not get costs from the date of expiry of the original offer, and would have to pay the defendant’s costs from the expiry of the original offer to date.

However, given that the difference between the two offers is £50,000, it is likely that both the client and the solicitors would be very much better off accepting that original offer.

Comment

Best just to toss a coin on all Part 36 matters.

Written by kerryunderwood

March 29, 2022 at 12:37 pm

Posted in Uncategorized

COSTS ROUND-UP ZOOMINAR – TUESDAY, 29 MARCH 2022 AT 4PM

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Still time to book – here – video and notes will be sent to everyone including those unable to attend the Live Zoominar. For further information please contact Tarryn van Graan on tarryn.vangraan@lawabroad.co.uk or 01442 430900.

The Zoominar will cover:

Guideline Hourly Rates 2021

  • Retrospective
  • Relevant to all cases
  • Review underway already

Budgeting

  • To be curtailed or scrapped?
  • The incurred costs problem
  • Pre-issue fixed costs
  • Review of Pre-Action Protocols
  • The new Clinical Negligence Scheme – a model for other work?

Costs Following The Event: Review Underway

Costs Capping

Proportionate Costs (not proportionality)

Solicitor and Own Client Costs

  • Limited to the  budget?  – ST v ZY
  • Limited to fixed recoverable costs?
  • Contractual indemnity for costs

Wasted Costs and Non-Party Costs Orders

Indemnity Costs and Unreasonable Conduct Uplift

Court Fees and Remission

Injunctions. Freezing Orders, Split Trials etc.

Written by kerryunderwood

March 28, 2022 at 3:17 pm

Posted in Uncategorized

SHANE WARNE: A MEMORY

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Shane Warne’s funeral took place on Sunday; the State Memorial Service is next week.

I met Shane a few times at Lord’s Taverners events, but the first meeting was the most memorable.

It was at Radlett, “a small Hertfordshire Town” in Wisden’s words, on 30 April 1993, and the very first match of the Australian Tour: England Amateur XI v Australians.

The match started at 10.45am and I was in court in nearby St. Albans, arriving sober and in suit and tie in the afternoon; many others were not sober, with bare beer bellies exposed.

By contrast Shane was wearing two pullovers and bowling not very good off-spin, taking 2 for 41 of 9.2 overs against amateurs.

When not bowling he was fielding right in front of me and being teased mercilessly for his two pullovers and his bowling;

“This is as warm as it gets – you will need four pullovers most of the time here mate.”

Suspecting, correctly, that I might make more sense than most of the crowd, due to the lack of alcohol and not for any other reason, we got chatting and I will always remember his face when I said that they were right about one thing – this was about as warm as it would get. (It was the warmest April day in nine years and the second highest ever.)

Later we had a few beers and I mentioned that I was a leg spinner and thought he was as well and again I will always remember his laugh and him winking and saying

“Wait for the Test Matches.”

His first ball in that series was the famous “ball of the century” to bowl Mike Gatting off stump from a ball pitching outside leg stump.

Here are our respective records:

BowlerBallsWicketsRuns5wAvgeEconStrike RateYear
Shane Warne (ODI)106422937541125.74.2536.31993-2005
Shane Warne (Test)40705708179953725.42.6557.51992-2007
Kerry Underwood (Bovingdon CC) 61682234857921.784.7227.61993-

You need to work on your strike rate and average Shane😊. Okay – yours were Test Matches and mine were in village cricket 😊.

You will have a laugh at that.

Thank you for the pleasure and memories you have given to us all 😊

 Rest in peace  xxx

Written by kerryunderwood

March 23, 2022 at 10:16 am

Posted in Uncategorized

PART 36 ZOOMINAR: TUESDAY, 22 MARCH 2022 AT 4PM

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Book here to attend or for the recording.

Here is the video of last year’s Part 36 Zoominar.

Can you afford to miss this one?

Topics Covered

  • 35% Uplift Rather Than Indemnity Costs: The New Regime
  • 50% Uplift/ Penalty For Unreasonable Conduct;
  • Day One Offers: Getting Round The Unusual Costs Rule
  • Interplay With Fixed Recoverable Costs Up To £100,000;
  • Interplay With Qualified One-Way Costs Shifting;
  • Common Law Doctrine Of Mistake
  • Claimant Becomes Defendant
  • “Genuine Offer To Settle”
  • Calderbank Offers
  • Personal Injury: No Costs Consequences For Late Acceptance
  • Lowering Offers: A Trap To Avoid
  • No Conditions
  • Interplay With Settlement Agreements
  • Withdrawing Accepted Offer Prior To Approval
  • Strict Application

Written by kerryunderwood

March 21, 2022 at 1:05 pm

Posted in Uncategorized

PART 36 AND FIXED RECOVERABLE COSTS: THE NEW SCHEME

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This piece appears in my Newsletter Special – Extension of Fixed Recoverable Costs which contains the course notes from my Zoominar – Extension of Fixed Recoverable Costs- which took place this past Tuesday, 15 March 2022.

You can book here to receive the recording and the special edition.

The current fixed recoverable costs scheme only applies to personal injury cases, and in such cases the claimant, absent misconduct, is protected by Qualified One-Way Costs Shifting form paying the defendant’s costs, even if they lose.

Part 36 was a potential exception to Qualified One-Way Costs Shifting, in the sense that a claimant who accepted a Part 36 offer late, or failed to beat it at trial, risked having the post Part 36 defendant’s set-off against their own pre-part 36 costs or damages.

Following the decisions of the Supreme Court in

Ho (Respondent) v Adelekun (Appellant) [2021] UKSC 43

and of the Court of Appeal in

Cartwright v Venduct Engineering Ltd [2018] EWCA Civ 1654

a claimant is no longer at risk of such set-off, unless there is a court order, that is essentially the matter goes to trial.

A defendant who accepts a claimant’s offer late suffers no penalty, but if at trial the claimant matches or beats its own Part 36 offer, then the claimant gets indemnity costs.

All that changes in all types of cases in the new fixed recoverable costs scheme, both for sub £25,000 claims, and for those valued at between £25,000 and £100,000.

A claimant who matches or beats its own offer at trial will receive a 35% uplift on fixed recoverable costs.

Likewise, if a claimant fails at trial to beat a defendant’s Part 36 offer, then the claimant will pay a 35% uplift on fixed recoverable costs.

The 35% uplift will apply to the fixed costs from the stage in which it expired.

Consequently, as now, the earlier the better is the mantra for Part 36 offers.

The additional benefits of a 10% uplift on damages etc. will remain.

A claimant accepting a defendant’s offer late will pay a 35% uplift for the stage or stages after the expiry of the time for accepting the offer.

It is presumed that that will also be the case for a defendant accepting a claimant’s Part 36 offer late, although that is not the way that the courts have interpreted the existing provisions.

It is presumed that in personal injury claims, the law will remain as it is at present, although it should be noted that in the separate clinical negligence fixed recoverable costs proposals, the claimant will lose some of the existing Qualified One-Way Costs Shifting protection.

I will deal with all of this in much greater detail in the Zoominar on Part 36 at 4pm next Tuesday, 22 March 2022, and there will be a Part 36 Special Newsletter next week.

Counsel’s Fees

Under the new fixed recoverable costs scheme, counsel’s fees cannot be claimed as a disbursement, but they are a ring-fenced fixed counsel’s fees in Band 4 of the fast fast track, and in all Bands in the intermediate fast track.

There are three separate types of ring-fenced counsel’s fees

Stage 2

Stage 7

Stage 11 – Stage 13

Supposing a claimant makes an offer which it matches or beats at trial, and therefore qualifies at for the 35% uplift on fixed costs.

Does that 35% uplift apply to counsel’s ring-fenced fees for the various stages as set out above.

The short answer is that I do not know.

At present counsel’s fees are regarded as a disbursement, but if indemnity costs were awarded, then a higher figure would be paid for counsel’s fees, as they would be paid on the indemnity basis and not the standard basis and, for example, proportionality would not apply.

My preliminary view, but it is only a preliminary view is that the 35% uplift will apply to counsel’s ring-fenced fee.

Here, I have used the example of a claimant matching or beating its own offer, but exactly the same would apply in relation to the fees of counsel instructed by a defendant if a claimant failed to beat the defendant’s offer.

This is specifically stated to avoid the need for detailed assessment “and the keeping of records to inform an assessment.”(my bold)

Written by kerryunderwood

March 18, 2022 at 11:51 am

Posted in Uncategorized

INFLATION AND UPRATING: FIXED RECOVERABLE COSTS: A MAJOR PROBLEM

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This piece appears in my Newsletter Special – Extension of Fixed Recoverable Costs which contains the course notes from my Zoominar – Extension of Fixed recoverable Costs- which took place this past Tuesday, 15 March 2022.

You can book here to receive the recording and the special edition.

This is a major cause for concern.

In his July 2017 Report, Lord Justice Jackson uprated the sub £25,000 claim figures by 4% to take account of inflation between 1 April 2013 and 13 July 2017.

Review of Civil Litigation Costs: Supplemental Report Fixed Recoverable Costs

Five years on, the Government has kept those 2017 figures, without any uprating for inflation in the meantime.

Lord Justice Jackson recommended inflation increases every three years by reference to the Services Producer Price Index saying that annual increases would generate too much complexity and confusion in ongoing cases.

He said that insofar as part of the fixed recoverable costs are a percentage of damages that element did not need uprating as the level of damages rises over time to take in to account inflation.

Consequently, it is only the fixed element that needs uprating.

This is a problem anyway, but  brought sharply into focus by the rapidly increasing levels of inflation.

According to the Bank of England inflation calculator, the fixed element needed to have increased by 21.9% since 2013, just to stand still,  and that was in a period when inflation averaged 2.5 % a year, and clearly it is about to rise sharply.

Even since Lord Justice Jackson’s Report in 2017, there should have been a further increase of 11.19%, just to stand still, with inflation averaging 2.9% a year over that period.

Lord Justice Jackson uprated the figures by 4% , covering the period from 2013 to 2017, but in fact inflation over that period was 8.9%, averaging 2.2 % a year.

Written by kerryunderwood

March 18, 2022 at 10:39 am

Posted in Uncategorized

EXTENDING FIXED RECOVERABLE COSTS TO ALL CIVIL WORK UP TO £100,000 : ZOOMINAR 15 MARCH

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The Zoominar at 4pm-5pm, Tuesday, 15 March 2022 can be booked here and includes a video of the Zoominar, whether or not you attend live, and full notes.

The extension is scheduled to come in this October, and may be retrospective in that the relevant dates may be the issue of proceedings or the letter of claim, as is proposed with clinical negligence cases.

This is the biggest change for civil litigators since the Woolf reforms over 20 years ago.

The Zoominar will cover:

  • The extension of the FastTrack to £100,000;
  • the level of fixed costs;
  • the fixed cost stages;
  • the bands of complexity;
  • Part 36;
  • counsel’s fees

Book online here or contact my Personal Assistant Tarryn van Graan on tarryn.vangraan@lawabroad.com

Kerry Underwood

Written by kerryunderwood

March 14, 2022 at 12:13 pm

Posted in Uncategorized

KERRY ON COSTS… AND SO MUCH MORE… CLIENT CARE SPECIAL EDITION

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Below is Issue 43 of Kerry On Costs… And So Much More…, a weekly costs Newsletter, and this Special Edition deals with Client Care and has a link to a Model Client Care Letter template and sets out the text of the Solicitors Regulation Authority Guidance in this field.

You can subscribe to the Newsletter here.

In the Zoominar today Tuesday 8 March 2022 at 4pm – Preventing Challenges to Bills – I will not deal with this in any detail, but it is helpful background reading, and useful on a daily basis in practice.

If you have not yet booked on to the courses, you can do so here or contact Tarryn van Graan on tarryn.vangraan@lawabroad.co.uk Please remember that anyone attending the courses is entitled to free copies of Kerry on… Qualified One-Way Cost Shifting, Section 74 and Set-Off as well as my three-volume book Kerry On… Personal Injury Small Claims, Portals and Fixed Costs, and if you would like to take advantage of this offer, then please contact Tarryn van Graan on tarryn.vangraan@lawabroad.co.uk

The link to Issue 43 can be found here.

CLIENT CARE LETTER

Just One Client Care Letter

I advise having just one Client Care Letter, incorporating Terms of Business, any Service Level Agreement etc.,  and a separate Funding Agreement, and having as a separate page at the end of the Client Care Letter, a Costs, Next Steps and Timetable Schedule.

The reason is to avoid a mass of documents, all of which must be updated whenever changes to, for example, the hourly rate are made, with the scope for inconsistencies as one document, but not others, is updated.

Time and time again, when representing solicitors against former clients in Solicitors Act 1974 challenges, I see major inconsistencies in different documents, and of course the client is entitled to rely on the document most favourable to them.

I strongly advise having a just one Client Care Letter, whatever the type of case, as otherwise lawyers can choose the wrong one.

When it comes to formalities such as the Client Care Letter, the less choice the better.

My own firm’s Client Care Letter was the same one used for a client making a Will, as for the administrators and liquidators of Cambridge Analytica, a high profile and highly complex commercial case, where we acted for the administrators and liquidators.

Neither the Client Care Letter, nor the Costs, Next Steps and Timetable Schedule need to be signed, but my  advice is to get the client to sign, scan and return the signature page of the Client Care Letter and the Costs, Next Steps and Timetable Schedule.

It is far harder for a client to deny that they gave consent to the retainer if they have signed and returned the Client Care Letter and the schedule.

This was a key part of the High Court’s finding in the

Higgins & Co Lawyers Ltd v Evans [2019] EWHC 2809 (QB)

where I advised the successful firm of solicitors.

My piece regarding signatures is found at Issue 37 at pages 39-45 – DEATH AND CONTINGENT AGREEMENTS

My Model Client Care Letter appears here. The Costs, Next Steps and Timetable Schedule is here, but it is short, so I also set it out –

COSTS, NEXT STEPS AND TIMETABLE SCHEDULE:

(insert file name)
(Insert file number)
(Insert matter )

Costs

Next Steps

Timetable 

Signed: ……………………………….                     

               (insert client’s name and surname)

Date: ………………………………….

If acting on an old-fashioned hourly rate, win or lose, then that information can be inserted in the Schedule, which can be expanded to include as much information as you want.

Some examples of Schedules, for example for fixed fees, appear below –

COSTS, NEXT STEPS AND TIMETABLE SCHEDULES

  1. Single Will
  1. Mirror Wills
  1. Single Lasting Power of Attorney
  1. Pair of Lasting Powers of Attorney
  1. Four Lasting Powers of Attorney
  1. Purchase of Property
  1. Sale of Property
  1. Transfer of Equity
  1. Re-mortgage
  1. Employment: Settlement Agreement

Reference off to websites

I advise against having references off to a firm’s website in the Client Care Letter, without the relevant material being printed in the Client Care Letter.

Firstly, it renders the client’s signature of the Client Care Letter almost meaningless, as that signature will not be taken to apply to links to your website, rather than text in the Client Care Letter.

Secondly, in relation to certain issues, the text must appear in the Client Care Letter or a similar document.

Complaints Procedure

An example of text that must appear in the Client Care Letter, or similar document, is the Complaints Procedure and simply referring off to the website, which many firms do, is a breach of the Solicitors Code of Conduct.

It is well established that a breach of the Solicitors Code of Conduct can void the whole retainer, leading to no costs being recoverable from the client, and due to the indemnity principle, the other side can piggy-back on the lack of a valid solicitor and own client retainer to avoid paying costs.

My piece regarding this is found at Issue 39 at pages 75 –

Unenforceability Due to Breach Of Solicitors Code of Conduct

The former client had argued before the Costs Master that the Conditional Fee Agreements were unenforceable for illegality with the illegality relied upon being a breach of the Solicitors Regulation Authority Code of Conduct, specifically the obligations of solicitors to act with integrity and in the best interests of their clients.

As the Master had found the Conditional Fee Agreements to be invalid, a decision overturned by the High Court here, she had not considered this point.

76.         The parts of the Code to which GEHC referred included a number of general duties such as the Solicitors’ obligations under the Code to act with integrity, to act in the best interests of their client, to behave so as to maintain public trust, to give their clients the best information about costs confirmed in writing, to give a full explanation of any CFA and to insist on their clients taking independent advice before making gifts. It is not in issue that many of the statements of general principle reflected duties to which the Solicitors were subject under the Code.

It was accepted by both parties that the High Court here did not have sufficient information to reach a decision on the facts, but the former client asked for the matter to be remitted to the Senior Courts Costs Office for the appropriate findings of fact to be made, and a decision reached.

The High Court agreed and remitted that matter.

Thus, the significance of the decision is that a breach of the Solicitors Code of Conduct is capable of amounting to illegality rendering a retainer unenforceable.

SRA Code of Conduct

Complaints handling is governed by paragraphs 8.2-8.4 of the Solicitors Regulation Authority Solicitors Code of Conduct and reads –

8.2 You ensure that, as appropriate in the circumstances, you either establish and maintain, or participate in, a procedure for handling complaints in relation to the legal services you provide.

8.3 You ensure that clients are informed in writing at the time of engagement about:

(a) their right to complain to you about your services and your charges;

(b) how a complaint can be made and to whom; and

(c) any right they have to make a complaint to the Legal Ombudsman and when they can make any such complaint.

8.4 You ensure that when clients have made a complaint to you, if this has not been resolved to
the client’s satisfaction within 8 weeks following the making of a complaint they are informed, in writing:

(a) of any right they have to complain to the Legal Ombudsman, the time frame for doing so and full details of how to contact the Legal Ombudsman; and

(b) if a complaint has been brought and your complaints procedure has been exhausted:

(i) that you cannot settle the complaint;

(ii) of the name and website address of an alternative dispute resolution (ADR) approved body which would be competent to deal with the complaint; and

(iii) whether you agree to use the scheme operated by that body.

It will be noted that paragraph 8.3 requires that solicitors ensure that clients are informed in writing at the time of the engagement about the matters listed in 8.3 (a)(b) and (c).

Simply having this information on a website, and referring to it, is not informing the client in writing at the time of engagement.

Privacy Policy and the Data Protection Act 2018

This is not required to be in writing, unlike the complaints handling procedure, and therefore a reference off to the website is valid, but you still have the same point – the signature by the client of the Client Care Letter will not be taken to mean that the client has read it.

Again, my advice is that it should be in the body of the Client Care Letter.

Adverse Costs

I have seen Client Care Letters that state that the client is unlikely to have to pay the costs of the other party to a dispute if court proceedings are not issued.

That is correct at present but will change once fixed recoverable costs are introduced to virtually all civil claims of £100,000 or less, and the current timetable for that is October of this year, although it is possible that that will slip into April 2023.

I advise removing any such provision now.

County Court Claims

Solicitors need the client’s written agreement to charge, in a County Court Claim, more than what the client would recover from the other side in those court proceedings, and that is governed by section 74(3) of the Solicitors Act 1974 and CPR 46.9(2) and (3).

This is a key issue in the appeal in the Court of Appeal against the decision of the High Court in

Belsner v Cam Legal Services Ltd [2020] EWHC 2755 (QB)

On 23 February 2022, the Court of Appeal abandoned the hearing of the appeal and ordered it to be heard again, with fresh skeleton arguments etc. before 31 July 2022.

A key issue is whether, in any Contingent Fee Agreement, including Conditional Fee Agreements, the solicitor has to cap all charges to the client by reference to damages, but the issue of section 74(3) of the Solicitor Act 1974 is a live issue.

I wrote about this in 2016, but unfortunately members of the Court of Appeal appear not to have read my piece, which is here.SECTION 74: KEY COSTS LAW YOU HAVE NEVER HEARD OF

Informed Consent

A key issue now in relation to client challenges under the Solicitors Act 1974 is that of informed consent, in other words did the client understand and consent to the terms of the retainer.

Obviously the Client Care Letter, especially if you follow my advice and unify everything within this one document, is a key part of the process of obtaining informed consent.

Always offer to discuss with the client, ideally face to face, but otherwise by Zoom or Microsoft Teams, the contents of the Client Care Letter, and consider recording a YouTube video to accompany and be sent to the client.

Solicitors Regulation Authority Guidance

The latest guidance in relation to Client Care Letters was updated on 25 November 2019 and is here, but for ease of reference, I set out the full document below.

The following points should be noted:

(i) The information about your services must be provided at the point of engagement with the client, and as the matter progresses;

(ii) Information that must be provided includes the likely cost and how to complain if things go wrong.

These do not need to be in a Client Care Letter but as the Solicitors Regulation Authority say:

“When they begin working with a client, firms often provide this information in a Client Care Letter.”

Costs information can be included in the Costs, Next Steps and Timetable Schedule, but where there is a Contingent Fee Agreement, be that a Contingency Fee Agreement under section 57 of the Solicitors Act 1974, or a Conditional Fee Agreement, or a Damages-Based Agreement, I advise that the costs information be contained in that document, and that can be referred to in the Costs, Next Steps and Timetable Schedule.

Always consider whether your client may have low literacy levels, visual impairments, or has English as a second language.

If so, make special arrangements, such as recording the Client Care Letter and/or preparing a YouTube video and/or arranging for someone who speaks the client’s first language to interpret or translate.

Note that the information under the Consumer Contracts (Information, Cancelation and Additional Charges) Regulations 2013 require legal service providers to provide their clients with certain specified pre-contract information, such as the main characteristics of the service and the best possible information about the overall cost of the matter, and if there are likely to be any disbursements.

The guidance could be more helpful. For example it says:

“some client care letters are designed to comply with our obligations, rather than to provide information to clients in a user-friendly way.”

Well, obviously you do need to comply with the Solicitors Regulation Authority obligations, and that is not always possible to do in a user—friendly way.

The Solicitors Regulation Authority does say that you may consider using links if emailing, or providing information on your website that can be easily accessed, but my advice is against that for the reasons set out above.

The Solicitors Regulation Authority also suggested that you can personalize the information by adding details of the client’s case, and tailoring it.

Again, for reasons set out above, I advise against that, but I have no problem in a separate letter, which is not a Client Care Letter or a Funding Letter, advising the client about their particular case or matter, and indeed this is a good idea, as it ensures that it is personalized.

The Solicitors Regulation Authority also advises using a large and clear font size which must be right. I frequently have to use a magnifying glass to read Client Care Letters from other solicitors. There is no way that a court will hold that a client has given informed consent to the contents of such an illegible letter or email.

The Flesch-Kincaid Ease Score

The Flesch Reading Ease Score was first used in 1948 to show how readable a text is. The score lets you know the approximate educational level a person will need to be able to read a particular text easily.

How comprehensible a document is will be indicated on the Flesch Reading Ease Score by a number between 0 and 100. Scores around 100 mean the document is extremely easy to read, while scores around 0 mean that it is highly complex and difficult to understand. Conversion tables can be used to translate the score into educational levels, e.g., if the score is around 70 to 80 that equates to the text being appropriate for around school grade level 7, i.e., the average adult should find it reasonably simple to read.

The Flesch Reading Ease score is arrived at by using this equation:

Flesch Reading Ease Score = 206.835 − 1.015 × ( Total Words / Total Sentences ) − 84.6 × ( Total Syllables / Total Words )

These scores are used by policy writers, research communicators, and digital marketers in order to find how easily a target audience will be able to understand and engage with a particular text.

The Flesch-Kincaid Grade Level

The Flesch-Kincaid Grade Level shows what educational level a person will need in order to understand a particular text.

The scores created by the Flesch-Kincaid Grade Level match up to the US grade levels of education readers will need to be able to comprehend a particular text, e.g., if the text has a Flesch-Kincaid Grade Level of 9, to be able to understand the document easily the reader would have had to have undergone around nine years of education (i.e., reached around 9th grade).

The Flesch-Kincaid Grade Level is assessed by examining how many words, sentences, and syllables a document contains, employing the equation below:

Flesch-Kincaid Grade Level = 0.39 × ( Total Words / Total Sentences ) + 11.8 × ( Total Syllables / Total Words ) − 15.59

The Client Care Letter scores 56.4. It requires the reading ability of a 10th to 12th grade student which is fairly difficult. This is not ideal but reflects the fact that we have to include a great deal of technical regulatory material.

I advise running any communication to a client through this test.

Client Care Silver Service

This piece first appeared in slightly different form in the Law Society: Managing for Success newsletter.

Solicitors’ client care levels are far better than they were when I started work 48 years ago.

Speed of service, clarity of communication and transparency concerning costs and the attitude towards complaints are now all taken seriously by most firms. That was not always the case.

All the evidence is that in any field consumers or customers look for value for money rather than just price and are prepared to pay more for higher quality. Clients with a one-off purchase in a “high ticket” matter of great importance to them will be guided by matters other than price.

Clearly there are different models appropriate for different firms. If you just want to make as much profit as possible out of referred conveyancing or personal injury work where you never see the client then you are probably not reading this anyway. However, if you wish to build up a firm with a good reputation which other lawyers wish to join, and in due course take over, read on.

None of the ideas here is expensive or difficult to implement but they do require a culture that every member of the firm buys into, especially the decision makers and senior lawyers.

Lead by Example

Do not expect junior staff to have service levels which the decision makers are not prepared to observe. For example, I never managed to time record centrally and properly, so we have scrapped it.

Clarity of Objectives

Have clear, objectively measurable standards which mean something to clients and which they, as well as all staff, understand. Concepts such as whether a matter has been progressed satisfactorily have their place but are open to subjective interpretation.

Core Promises

We have four core promises which appear in a single page opening letter as well as in the much longer client care letter:-

  1. We will see you within 5 minutes of your appointment time or your arrival in the office, whichever is later.
  2. We will contact you each calendar month to tell you how your case is progressing.
  3. If you telephone us before 3.00pm we will return your call within 3 hours.
  4. Any email received from you by 3.00pm will be answered the same day.

These are easily measurable by clients and by the firm through its audit process.

We pay £100.00 each and every time any of these four core promises are not met.

Mean It

Many firms have “SLAs” – meaningless jargons to most non-business clients (Service Level Agreements) but pay little attention to them unless there is a complaint.

Do the senior people in your organisation spend as much time and energy on core quality standards as they do on billing targets? If not why not? They are far more important. Give a consistently high quality service at an affordable price and the work will follow.

Do you pay bonuses on client service levels rather than on, or as well as, billing?

Transparency

Consider publishing the audit results on your website. We audit 10 files a month per lawyer on specific measurable items. If you get 100% you get a bottle of champagne or equivalent. This has become a matter of pride, not policing, for our lawyers and again it is important that all senior people are included in the audit and are performing.

Little Things Matter

All of us are capable of finding excuses not to do things we are worried about. Recognise that many clients would rather go to the dentist than see a lawyer. Here are some ideas as to make the process less painful:-

• offer, where appropriate, a Microsoft Team, Zoom or WhatsApp meeting;
• offer to record the meeting and send a copy of the recording to the client;
• if the client is to attend the office –
– inform them about parking arrangements;
– send clients an AA or Google directions from their home to your office;
– give details of public transport from their home to your office;
– offer to pay for a taxi from the railway station to the office;
– offer to pick them up

I prefer to see clients at our office rather than at their home with their dog peeing over me and the TV on etc. so I am surprised at how many firms offer home visits but will not spend far less effort in enabling clients to come to the office, for example by offering to pick them up from the station.

In a post-Covid world, a Zoom or Teams meeting is an excellent compromise between a home visit and the client having to come into the office.

Reception

Visit any doctor’s surgery and then do exactly the opposite.

The receptionist is a key person and should be warm, smiling, welcoming and reassuring. Have the best coffee in town and have the coffee maker in reception. Have nice clean cups, pastries, biscuits, paper napkins, fruit juice, water etc.

No out of date newspapers, magazines etc.

Think very carefully about how the reception is decorated. Nothing is less welcoming than a gloomy poorly lit untidy reception area with hard chairs.

Light colours, plenty of light, comfortable sofas and the smell of coffee creates a very different impression. We have framed Buddhist posters, one of which has the message “Quiet in the land”. The reception should be a warm and welcoming haven of peace for people likely to be nervous and dealing with a matter of utmost importance to them.

The Meeting

Ensure that the meeting room is warm – literally – and welcoming. If you have space then have two types of meeting room – an across the table type one and a sofas and no table one.

Take as long as it takes! Time recording bean counters will tell you that this is inefficient. Rubbish. There is nothing efficient about having to pay or advertise for work because you cannot get it in on reputation.

Those two or three hours with a new client building their loyalty and that of their family and friends is the most valuable time you will ever spend.

Ensure that each 45 minutes or so someone pops in to see if any more tea or coffee is needed. If the meeting takes places around lunchtime offer to buy sandwiches.

Toilets

Clean, with soap and clean towels please! The only rooms your clients will normally see are reception, the toilet and the meeting room, often in that order. Make an effort with each of them.

Play area

If possible, have a play area for children and someone who can supervise children while the parent is in a meeting.

Attire

Smart and professional.  Many lawyers complain about lack of respect from clients yet dress sloppily and have untidy and unwelcoming offices where the client seem to be an unnecessary distraction and intrusion, rather than the lifeblood of the business. I once threw our (former) accountant out for coming in to my office looking like a tramp. For him it was dress down Friday – for me it was an embarrassment if any of my clients or staff saw him. He lost our business as a result.

Difficult clients

Difficult cases I love; difficult clients I do not. They are never worth it. Each client is spoken to first by a solicitor on the phone to try and judge what the client will be like.

Red Alerts

• Getting our name from an internet search without looking at our website
• Asking for a free first interview
• Querying price
• Already got solicitors
• Close to limitation period
• Suggesting that the case will raise our profile
• “Do this one well and we will have other work for you.”
• Been acting as a Litigant in person

Accessibility and Availability

• Microsoft Teams
• Zoom
• WhatsApp
• YouTube
• 24/7 phone line
• Evening opening
• Saturday morning opening
• Easy, cheap and productive, but few firms have these facilities.

Newsletters

No one, but no one, is interested in your ground-breaking case on the White Fish and Ancillary Matters Regulations, not even the client you are acting for.

Prize draws, social events, auctions etc. catch clients’ imaginations. Consider having a prize draw in every newsletter, for example, press the reply button and automatically get entered into a draw for dinner for two at a local restaurant or whatever.

That gets the newsletter read and you can get across something about the firm, for example evening and Saturday opening.

Costs

Lawyers are expensive and should be. Do not apologise and do not go down market – leave that to the Failing Factory Firms. Explain to the client the fully comprehensive insurance that they are getting – that is why unbundling is mad.

Reassurance and certainty about costs are important.  For example in litigation everything is moving towards fixed costs and contingency fees. That introduces certainty, which clients like, and should mean that firms compete on quality rather than price.

The ethical danger is the temptation to under-settle and thus get out early for a quick fee for little work.

Thus a claim of £5,000.00 is being done on a 25% contingency fee and if it goes the distance will take 30 hours. Settling for £4,000.00 after 10 hours’ work is far better for the solicitor than earning another £250.00 – 25% of £1,000.00 – for another 20 hours’ work.

In fact most clients prefer to settle early for less but reassurance is critical. At Underwoods Solicitors we have had for 24 years an appeal process for clients in any contingency or fixed fee case whereby they can appeal, at our expense, to a named QC and we will abide by her or his decision. Thus if we have settled for £4,000.00 and the QC thinks that the case is worth £5,000.00 we pay the extra £1,000.00 plus the QC’s costs.

Communication

The telephone, and I include in this definition Microsoft Teams and Zoom, is the best tool in the office. More can be got out of one phone or video call than an exchange of 20 emails. When you do write make sure that it is in language that is easy for any client to understand. Few lawyers now deliberately use jargon to show how clever they are; happily that is a thing of the past. Nevertheless an email that a client has trouble understanding is upsetting and demoralising for that client.

It is very easy to see how clear a written communication is. Just copy and paste the whole piece into the Flesch-Kincaid Test accessible at https://readability-score.com/ and it will give you a score. We aim always to have a score of 60 or over which means that it can be understood by a normal 13 to 15 year old.

The key things to avoid are long sentences and paragraphs with semi-colons and brackets in sections and sub-clauses etc.

Short punchy paragraphs with no jargon always score well.

Cost

All of the ideas here we have implemented successfully and the common factor is that they do not involve spending tens of thousands of pounds on software systems etc.

Tea, coffee and taxis are worth far more.

Knowing a bit about the law also helps, but clients are rarely able to judge you on that. They can judge you on all of these other things.

This piece scored 68.4 on the Flesch-Kincaid Test.

“Sometimes things become possible if we want them bad enough.” – T.S. Eliot

Written by kerryunderwood

March 8, 2022 at 2:01 pm

Posted in Uncategorized

ONLINE COURT 2022: A PLAY

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RK:

I’m Reggie. I appear on behalf of the Claimant.

RK:

I’m Ronnie. I appear on behalf of the Defendant.

JUDGE:

I am the Judge.

RK & RK (In unison):

We know, You’re the bastard that sent us down.

JUDGE:

Are you McKenzie Friends?

RK(1):

You’re having a laugh. You sent us down for murdering him at the Blind Beggar and Jack “The Hat” McKenzie ain’t no friend of ours.

RK(2):

McVitie, Reggie. It was Jack “The Hat” McVitie, not McKenzie.

JUDGE:

You seem to know each other. Isn’t that a conflict of interest?

RK & RK:

Conflict of interest? That was us and the Richardson gang. That was a conflict! Not appearing in the online court.

JUDGE:

Are prisoners allowed to represent people?

RK & RK:

It was that or sewing mail bags. What with email and online courts there aren’t many mail bags to sew now so the Governor assigned us to Small Claims Court work, what with our experience in court and all that.

JUDGE:

I see.

RK & RK:

That’s more than the Blind Beggar did, or Jack “The Hat” McKenzie does now [Laughter].

VLADIMIR:

Just want you to know I am here.

JUDGE:

Who are you?

VLADIMIR:

Just a hacker who has access to everything every litigant in your court does, says or thinks.

JUDGE:

Am I going to hear from your witnesses?

RK & RK:

Not unless you dig up the M4 motorway [Laughter].

JUDGE:

No laughing in court!

RK & RK:

We’re not in the court, we’re in Dartmoor, and what are you going to do about it – commit us to prison for contempt of court? [More laughter]

JUDGE:

I’ve had enough!

RK & RK:

We’ll tell you what enough is, Agreed damages at £10,000 – 100% contingency fee – cheque made payable to The Kray Twins, Dartmoor Branch.

JUDGE:

That doesn’t seem right.

RK & RK:

Tell the parties to apply for a Murderers Act detailed assessment. [Dartmoor erupts in laughter]

Notes:

  1. Her Majesty’s Government and some of Her Majesty’s Judges think that online trials are a suitable way of dealing with civil disputes.
  2. Anyone, including prisoners, fraudsters and perjurers  can appear as advocates in the Small Claims Court for a fee. Generally prisons have not let prisoners out for such work but with online courts it will not now be necessary.

Also see:

A Christmas Carol by the High Court

ANYWHERE COUNTY COURT 2018: SEND IN THE CLOWNS

Written by kerryunderwood

March 7, 2022 at 12:34 pm

Posted in Uncategorized

SOLICITORS DISCIPLINARY TRIBUNAL SLAMS SOLICITORS REGULATION AUTHORITY

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The Solicitors Disciplinary Tribunal, the judicial body which hears prosecutions against solicitors brought by the regulatory body, the Solicitors Regulation Authority, has said that fairness and transparency will be lost if the SRA goes ahead with a massive increase in its fining powers.

The Solicitors Regulation Authority issued a consultation paper stating that it plans to increase its fining powers from £2,000 to £25,000, and the Solicitors Disciplinary Tribunal has said that this would increase the risk of a miscarriage of justice.

It also said that it would erode transparency by preventing cases coming before a public hearing;

Solicitors Regulation Authority internal decisions are made without public or press scrutiny.  Although the Solicitors Regulation Authority publishes its decision notices in relation to most internal sanctions, its decisions are far shorter than a Tribunal Judgment and do not contain comparable explanation and detail.

It went on to say that if the Solicitors Regulation Authority received greater fining powers “the attendant diminution in the transparency of decision making and detailed reasoning would be in neither the public nor the profession’s interest.”

The Solicitors Disciplinary Tribunal said that any allegation of professional misconduct should be referred to the Solicitors Disciplinary Tribunal for full consideration, with the Solicitors Regulation Authority limited to handling technical matters or administrative errors.

It also said that a £25,000 limit risked defendant solicitors with limited resources, such as small firms, feeling compelled to agree a fine simply to avoid proceedings, even if they dispute the allegation.

Large firms or rich individuals would agree fines to avoid the scrutiny of public proceedings.

The Tribunal does not consider that any form of “plea bargaining” in the solicitors’ profession is appropriate given the importance of safeguarding the public’s trust and confidence in the profession as a whole.

The Tribunal said that it would be “wholly inappropriate” for there to be any possible perception that wrong doing in the profession is being swept under the carpet by a swift privately agreed financial levy rather than to be subjected to transparent public scrutiny,”

The Solicitors Disciplinary Tribunal has been highly critical of the Solicitors Regulation Authority, and in particular its level of costs, in a number of recent hearings.

Written by kerryunderwood

February 25, 2022 at 12:35 pm

Posted in Uncategorized

SELF-DRIVING CARS: NO FAULT REGIME

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The Law Commission has proposed that there be a new Automated Vehicles Act and that liability for any accident should fall on the manufacturer of the car, or other body responsible for obtaining authorization for road use, and not for anyone in the car.

I have avoided using the term “driver” as the whole idea of fully self-driving cars is that there will be no opportunity for anyone in the car to take over from the automated system.

All tests have shown that this is far safer, and that the vast majority of times when “drivers” seek to take over, it is unnecessary and much more likely to lead to an accident.

The report recognizes this distinction, that is between automated features that assist human drivers, for example adaptive cruise control and parking, with those that take over entirely.

The report recognizes that the person in the “driving seat” would in fact no longer be a driver but a user-in-charge who could not be prosecuted for offences arising directly from the driving task, but would retain other duties such as  checking loads and ensuring that children are wearing seatbelts.

There will be no civil liability on anyone in the car for driving matters.

These proposals would build on the provisions of the already in place Automated and Electric Vehicles Act 2018, which provides that people who suffer injury or damage from a vehicle that is self-driving will not need to prove that anyone is at fault.

Written by kerryunderwood

February 25, 2022 at 10:56 am

Posted in Uncategorized

393 COURTS SHUT IN THE LAST 25 YEARS

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Earlier this month the Ministry of Justice published, in alphabetical order, a list of the 244 courts and tribunals closed by it since 2010, and this was in response to a Parliamentary question from the Shadow Justice Secretary, Steve Reed.

The real total is even higher as the list does not include so-called integrations, where services have been merged into an existing nearby court or tribunal.

Between 1997 and 2009, when Labour was in power, 149 courts were closed, being 125 Magistrates’ Courts and 24 County Courts.

Consequently, 393 courts have been closed in the last 25 years.

The Government said that it is hoping to recruit over 1,000 Judges in the next financial year to help clear the court backlog, and the court is also removing the funding cap that limits the number of days Judges can sit.

The Government is also proposing to recruit a further 1,000 Judges the following year and 4,000 Magistrates over the next few years.

Recorders will be able to sit up to 80 days without a separate business justification being agreed and where there is a business justification, the maximum number of days a Recorder or District Judge can sit has been raised to 180.

The Statutory retirement age for Judges is to be raised from 70 to 75, and the Government predicts that this will allow a further 400 Judges and 2,000 Magistrates a year to stay in place.

Legislation will be introduced to allow fee paid Judges to sit in retirement and to extend Judges’ appointments past their compulsory retirement date.

Magistrates below the new retirement age will be reinstated where there is a business need.

Written by kerryunderwood

February 24, 2022 at 11:21 am

Posted in Uncategorized

APPEAL IN BELSNER ADJOURNED: SHAMBLES IN COURT OF APPEAL

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On 23 February 2022, the Court of Appeal stopped the hearing of the appeal against the decision of the High Court in

Belsner v Cam Legal Services Ltd [2020] EWHC 2755 (QB)

on the basis that they had not considered the wider issues.

The Court of Appeal in fact abandoned the appeal, and ordered it to start again later in the year, with fresh skeleton arguments etc., and suggested that a Costs Assessor sit with them.

As well as delaying by several months the delivery of a key judgment in relation to costs and solicitors retainers, the decision is a considerable embarrassment for a powerful Court of Appeal.

Given the amount of noise made by virtually all commentators on legal costs, including me, it is hard to see how the Court of Appeal failed to realize the wider issues involved in the case.

This will re-enforce the view of many lawyers that the senior courts are more interested in hearing cases between Russian Oligarchs who have no connection with the United Kingdom, as compared with matters which affect millions of this country’s citizens.

Written by kerryunderwood

February 24, 2022 at 8:45 am

Posted in Uncategorized

KERRY: MAD AS A MARCH HARE: THE 2022 ZOOMINARS

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  • Preventing Challenges to Bills                         Tuesday, 8 March 2022
  • Extension of Fixed Recoverable Costs            Tuesday, 15 March 2022
  • Part 36                                                              Tuesday, 22 March 2022
  • Costs Round-Up                                                Tuesday, 29 March 2022

Same KerryTime, Same KerryChannel – 4pm – 5.00pm

£50 for onePlus VAT
£80 for twoPlus VAT
£100 for threePlus VAT
£120 for fourPlus VAT
£10 per additional delegate per coursePlus VAT

Every delegate gets a recording of the Zoominar and detailed notes.

You can buy the notes and recording, without attending live, for the same price.

If you subscribe to Kerry On Costs.etc, or the Documents, Videos, Agreements and Advices Menu, or the Consultancy Package, then as many people as you want from your organization get this free. Please contact Tarryn van Graan on tarryn.vangraan@lawabroad.co.uk

Book Online here.

For the IT challenged, simply indicate in the table below which Zoominar(s) you wish to attend and pass them on to tarryn.vangraan@lawabroad.co.uk if even this is difficult for you 😊 please just email Tarryn or telephone her on 01442 954371.

Zoom MeetingDate & TimeI wish to attend this Zoominar.I wish to receive the recording and notes only.
Preventing Challenges to Bills8 March 2022
Extension of Fixed Recoverable Costs15 March 2022
Part 3622 March 2022
Costs Round-Up29 March 2022  

Please insert the email addresses in the space below of any colleagues who wish to attend.

Additional Delegate(s) Email Addresses
     

My Personal Assistant, Tarryn van Graan will send you an email containing the bill.

The link and the relevant course material will be sent to you the morning of the Zoominar.

Written by kerryunderwood

February 18, 2022 at 1:37 pm

Posted in Uncategorized

THE CIVIL JUSTICE COUNCIL REPORT ON THE RESOLUTION OF SMALL CLAIMS UNDR £500

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By Robert Males, Partner, Underwoods Solicitors

This piece appears in Issue 40 of Kerry On Costs… And So Much More…, a fortnightly publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.

By subscribing to the Newsletter, you are entitled to a free copy of my 1300-page, three volume book Personal Injury Small Claims, Portals and Fixed Costs and also a free copy of my book of Qualified One-Way Costs Shifting, Section 57 and Set-Off.

This recent report concentrates on small claims of a value of £500 or less. The report analysed issued claims over a three year period up to April 2021.

The research showed that approximately 50% of all small claims, those are claims up to a value of £10,000, where for a value of £500 or less.

To put that in context there are over 1 million small claims issued each year which means that there are over 500,000 claims at £500 or less.

These smaller claims have a disproportionate impact on the court system and the CJC was asked to look into how those claims can be dealt with in a proportionate and cost effective method.

Given the vast number of claims in this category this is the way that most people would interact with the court system and although a sum of £500 or less may not be of huge importance to some people it is very important to those litigating over these sums.

It is essential that in our society there is access to justice for all. It is also of paramount importance that the rule of law is preserved and that it can be seen to be working by the majority of people and especially those who use the courts.

A common complaint by the public is that the court system is complex slow and expensive to use.

The CJC in their report sought to ensure that their recommendations dealt with these low value claims in a proportionate manner both in relation to court resources but also in relation to the work that litigants would have to do to bring their claim.

The CJC also considered that it was important that cases were dealt with timely and at a reasonable cost.

As a result of the pandemic more remote and telephone hearings have been used in the last two years and experience has been gained not only by judges and lawyers and court staff but also the public at large have become more accustomed to dealing with matters in this way.

The ability to have a hearing on a remote basis can certainly save time and expense for everyone involved and as long as the rule of law is upheld and any decision reached is fair and reasonable then this must be the way forward.

The CJC has spent time considering options around mediation and recommended a procedure which involved litigants having to engage in compulsory mediation once the claim has been issued.

However, they recognize the importance of providing appropriate information to litigants particularly bearing in mind that in claims of £500 or less the vast majority are Litigants in Person with often little or no legal training.

The CJC recommended information being provided in clear and plain English and did refer to a video explanation.

This must certainly be the way forward as you can now find video clips on such platforms such as YouTube on just about anything so there is no reason at all why there cannot be a simple video explanation of the benefits of mediation.

To use a simple analogy if the court process was a football game then the only results that can be reached for the litigants is a win or a loss. However,  through mediation it is possible to have a draw where both parties do not lose and in some instances a draw can in fact mean a win, win for both parties.

The CJC looked at a pilot scheme operated in Birmingham which provided for Dispute Resolution Hearings at an early stage of the proceedings and whilst this would not be proportionate in terms of expense and delay in the smaller claims there was some evidence to suggest that it may be useful in the larger claims within the small claims limit.

However the CJC deferred their decision on this because further research and data is required.

I have already mentioned the importance of the rule of law and confidence which the public needs to have in the judicial system. It should not be underestimated the stress and anxiety which litigants find in any dispute and the quicker that dispute is dealt with the less stress and anxiety.

If a streamline procedure using remote and telephone hearings or indeed a decision on the papers can reduce the time and stress then that must be a benefit to all concerned.

However it is not the answer in every case.

For example if one or more of the parties are vulnerable persons or maybe they are unable to use technology or do not have access to the correct type of technology then that can lead to parties being aggrieved at any decision which is made against them.

The party who is successful through the court process is unlikely to complain but for the party who has a judgment made against them they will want to feel that they have had their say and been listened to even if they ultimately disagree with the decision of the court.

This is where any decision of the court on the papers will have to be considered carefully. It may be that a Litigant in Person was not able to put forward their case in sufficient detail or clarity to enable a decision to be made and if this is the case then it would be more appropriate for some form of hearing even if that is remote.

I am a fan of mediation having been involved in many over the years but it is important that mediation does not replace the right of any person to have their case heard by a court of law and in any explanation about the mediation process it should always be made clear that there is no pressure to agree during a mediation and that if any litigant is unhappy with the mediation then they have an absolute right to have their case determined by the court.

The recommendation of the CJC that the court have the power to order remote or telephone hearings or make a decision on the papers must be correct as indeed is the recommendation for a restricted right of appeal but that must not lose sight of the importance that the rule of law and the court system has in this country and that every person has the right to have their case heard in a court of law.

What the majority would like to see is a system which allows them to have a decision made at a reasonable cost and within a reasonable time and in my view the recommendations of the CJC should be taken forward as they will improve the current system for both litigants and the court system.

Written by kerryunderwood

February 15, 2022 at 12:52 pm

Posted in Uncategorized

2022: ALL CHANGE FOR CIVIL LITIGATORS

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This piece first appeared on Practical Law Dispute Resolution Blog on 7 February 2022.

In October this year, civil litigators will be introduced to fixed recoverable costs in virtually all civil claims valued at £100,000 or less, and this is likely to be the biggest culture change in their careers.

Expect £100,000 to become £250,000 within five years.

In my recent experience many non-personal injury lawyers are blissfully unaware of this impending, major change, which presents opportunities as well as challenges.

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 fixed costs if the matte settles pre-issue, and an entitlement to those costs without contractual agreement and assessment.

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.

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

Budgeting – to be scrapped?

Budgeting does not apply in fixed recoverable costs cases, and the Master of the Rolls has questioned the value of costs budgeting in any case.

Expect it to be curtailed, if not scrapped.

Will costs continue to follow the event?

The Master of the Rolls has queried the justification for the general policy in England and Wales that costs should follow the event.

They do not do so in family work or Employment Tribunal work, or indeed in most Tribunal work.

Few jurisdictions have the uncapped costs following the event rule that England and Wales has.

Watch this space.

Will location continue to affect hourly rates?

Unlikely.

The Guideline Hourly Rates were reviewed in 2021, after an 11 year gap, but are already under review again at the order of the Master of the Rolls to consider, among other things, whether location should have any bearing on recoverable hourly rates.

London offices have been shut for much of the last two years; work has gone on from where the lawyers live, that is Hemel Hempstead or Reading or Kent or wherever, and will continue do so, at least in part.

Now lawyers and everyone else should be free to have offices wherever they want, but how can there be any justification now for a paying party to pay for very expensive London rents and salaries?

To put this in context, for a Grade A lawyer the Central London  recoverable rate is more than double that for National Band 2, which is where many of those lawyers live, and are now working.

Do the paying clients care which location the lawyer is in? Of course not. Remote working has been brought into sharp focus by COVID, but it existed before then.

Suppose a Central London firm has at any one time half of its staff working from home, and so has half the rent, half the rates, half the fuel bills etc., although of course not half the salary bill.

Should the hybrid situation not be reflected in a lower hourly rate? This is really only a refinement of the principle set out in

Wraith v. Sheffield Forgemasters Ltd, Truscott v. Truscott [1998] 1 WLR 132 (CA).

Most of the staff of Underwoods Solicitors work in Wellington in the Western Cape of the Republic of South Africa. That is where our secretarial work is done, our phones answered, and much of our routine legal work is done. I was there for most of 2021.

Our overheads are lower; our operation is more efficient as we have qualified typists doing the typing, rather than two-fingered lawyers claiming lawyers’ hourly rates for typing badly.

We should get extra for our innovative approach, not less.

We have people studying in Wellington to qualify as Chartered Legal Executives, and no doubt, in due course, solicitors of England and Wales.

What will the Guideline Hourly Rates be for such people?

Will an entirely unqualified person in England and Wales be able to recover more for their work than a fully qualified solicitor who happens to be based in South Africa?

What about me personally?

Am I suddenly worth less because I am sitting in an office in Wellington in the Western Cape rather than in Hemel Hempstead?

What hourly rates do I charge for my colleagues sitting with me in the office in South Africa?

If I am working on a file and I travel from Hemel Hempstead to the Western Cape via Qatar, as I do, do I charge different rates depending on where I happen to be?

Do I have a break when the plane is flying over Central Africa as I would get really low hourly rates there?

Logically, is there now not an argument for punishing firms who maintain expensive offices in City of London when COVID-19 has demonstrated that this is entirely unnecessary?

You have the regulators in their usual way saying that in matters such as conveyancing, clients should look to instruct solicitors hundreds of miles away if the clients live in the south of England, so as to save money because fees are lower elsewhere.

The end game of that is to instruct English qualified lawyers in South Africa or India or wherever.

Will we shortly see a Costs Master sharply cutting the hourly rate for 100 hours of document review in Central London, on the basis that it could have been done at a third of the price in South Africa by lawyers qualified in England and Wales? If not, why not?

Unsurprisingly, Underwoods Solicitors and the five firms we carry out work for in South Africa have the fixed costs work done there – no issue of Guideline Hourly Rates – and keep the open costs work in England and Wales.

That is madness. Guideline Hourly Rates by reference to location is the equivalent of taking into account the increased costs of quill pens and carrier pigeons.

I mentioned above remote working, but 19 people in an office  in Wellington does not feel like remote working; it is just economic common sense – saving on the cost of delivering the service – just as it makes economic sense to have clothes made in cheaper jurisdictions.

Why should the legal profession be any different?

2022 is the Chinese year of the tiger, an animal attributed with courage and leadership.

How appropriate.

Written by kerryunderwood

February 14, 2022 at 9:15 am

Posted in Uncategorized

DISCLOSURE AND NOTICES TO ADMIT IN AN ELECTRONIC AGE

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This piece appears in Issue 34 at Pages 24 and 25 of Kerry On Costs… And So Much More…, a weekly publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.

Subscription gets free access to my four Zoominars in March.

By subscribing to the Newsletter, you are entitled to a free copy of my 1300-page, three volume book Personal Injury Small Claims, Portals and Fixed Costs and also a free copy of my book of Qualified One-Way Costs Shifting, Section 57 and Set-Off.

Notice to admit or produce documents as set out in CPR 32.19 provides that unless a notice to prove a document is served then a party shall be deemed to admit the authenticity of a document disclosed to him under CPR 31.

A party faced with such a notice needs to have the original document at trial and deal with any questions as to its authenticity.

The document will have been served under CPR 31 as part of the disclosure and inspection process, and that deals with documents sent electronically, and the party can give evidence in the same way.

For example, if it were an email, then the client can simply produce the email and show when it was sent etc., and likewise in relation to incoming emails or documents electronically.

A document created electronically is still a document; it is simply sent differently.

Practice Direction 31B specifically deals with disclosure of electronic documents, and the fact that a party or witness has scanned the document makes no difference; it will still be a document that can be printed off from wherever it has been saved.

Having said that, please note paragraph 7 of Practice Direction 31B which reads as follows:

“7 As soon as litigation is contemplated, the parties’ legal representatives must notify their clients of the need to preserve disclosable documents. The documents to be preserved include Electronic Documents which would otherwise be deleted in accordance with a document retention policy or otherwise deleted in the ordinary course of business.”

I can see that a problem might arise if a document had been saved electronically and then deleted and then deleted from the hard drive, in which case it might indeed be difficult to prove anything.

It is important to remember that the burden of proof in any civil claim, with some limited exceptions in relation to discrimination in employment cases, remains with the claimant throughout, and it is for the claimant to prove her or his case.

For all intents and purposes electronic documents are no different to actual documents.

For example, immediately a file is closed at my firm, we scan that file and physically destroy the original.

That is allowed by the Solicitors Regulation Authority, and there is no problem.

If the client needs any document, or we do, we simply print it from where it has been saved after having been scanned.

It is also important to remember that the notice to prove provision only relates to documents already disclosed under the Disclosure and Inspection Procedure, and therefore they must have existed, either in paper or electronic form, at that stage.

Where the documents have been scanned and disposed of, then the electronic version should disclosed on disclosure and inspection of documents under CPR 31.

Solicitors who are frequently dealing with the same witness, for example a credit hire company in credit hire claims, should discuss the matter with the credit hire company, or whoever, to ensure that the original paper documents are kept until the charges have been paid or the matter resolved through litigation.

The High Court recently reminded solicitors of their duty in relation to disclosure, and this was in the case of

Lock v Ravi-Shankar [2021] EWHC 3247 (QB)

In particular, paragraph 9 of the judgment refers, where the court quoted from the White Book, at Part 32:

“It is necessary for solicitors to take positive steps to ensure that their clients appreciate at an early stage of the litigation, promptly after the claim form is issued, not only the duties of disclosure and inspection which will arise if disclosure is agreed or ordered by the court but also the importance of not destroying documents which might possibly have to be disclosed. Moreover, it is not enough simply to give instructions that documents be preserved. Steps should be taken to ensure that documents are preserved.”

“It is further provided at Part 31.11 that:

“If documents to which the duty extends come to a party’s notice at any time during the proceedings, he must immediately notify every other party.””

Although the judgment refers to the solicitor advising promptly after the Claim Form is issued, my view is that you can substitute “after the matter is placed on the portal” in relation to portal matters.

Written by kerryunderwood

February 3, 2022 at 9:47 am

Posted in Uncategorized

HOURLY RATES

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The hourly rates in retainer documentation, including the Conditional Fee Agreement, are solicitor and own client rates and not what you would expect to recover from the other side, and not the figures which go in the budget.

My advice is that the solicitor and own client rates in your retainers should be the Guideline Hourly Rates plus 50%.

This is based on the old formula of advising a client that they would recover around two thirds of costs.

I appreciate that this will not happen in fixed recoverable costs cases, or small claims track matters, but it is a formula that the courts are comfortable and familiar with.

If you only have the Guideline Hourly Rates, then your Part 36 offers are meaningless in that if you match or beat your own Part 36 offer, then the paying party would only have to pay Guideline Hourly Rates, which is what they would have to pay in any event, even if you had not made a Part 36 offer.

Thus, having significantly higher indemnity costs gives your Part 36 offers teeth.

You only get the higher amount, in a fixed recoverable costs case, if the matter goes to trial, but the very existence of significantly higher indemnity rates can be used to put pressure on a defendant to settle, which is not the case if you are simply charging Guideline Hourly Rates.

Furthermore, it gives you a significantly higher pool of unrecovered solicitor and own client costs, and will mean that you are much more likely in any case to be able to reach your desired percentage deduction from damages, be that 40% or whatever.

The Guideline Hourly rates since 1 October 2021 are as follows:

Written by kerryunderwood

February 2, 2022 at 1:42 pm

Posted in Uncategorized

RESILING FROM ADMISSIONS

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This piece first appeared in Issue 34 of Kerry On Costs… And So Much More…, a weekly  publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.

By subscribing to the Newsletter, you are entitled to a free copy of my 1300-page, three volume book Personal Injury Small Claims, Portals and Fixed Costs and also a free copy of my book of Qualified One-Way Costs Shifting, Section 57 and Set-Off.

In

Shah v London Borough of Barnet [2021] EWHC 2631 (QB) (14 December 2021)

a Master in the Queen’s Bench Division of the High Court refused the defendant permission to resile from a pre-action admission in a personal injury case where the claimant had fallen over an uneven pavement, and where the defendant was the relevant highway authority.

The defendant had initially denied liability but later wrote to the claimant’s solicitors stating that “liability will no longer be in issue”.

This was the defendant’s application to resile from that admission, which had been made almost one year earlier.

The court decision here runs to 20 pages and is a detailed review of the caselaw and the Practice Direction, and is a very useful guide to this subject.

“On the particular facts of this case, I believe it would reflect poorly on the justice system to allow the defendant another last “bite at the cherry” in respect of liability arguments when so many experienced claims handlers have reviewed the matter already, and over a considerable period of time. An important component of the overriding objective is compliance with rules and practice directions and therefore with protocols. The purpose of the pre-action protocols is to narrow issues and resolve disputes, or parts of them, wherever possible without having to engage expensive court resource. If issues are to be re-opened at a later stage there need to be very good reasons as the overriding objective makes clear. There are likely to always be some cases where there is a reappraisal of liability risk assessments and it is appropriate, for a combination of reasons, to allow an admission to be resiled from, but this should not be commonplace.

I looked at this subject in my Pieces in Issue 1 at page 11-12 and Issue 19 at pages 8-9.

THE LEGAL TEST

CPR 14.1A(3)(b) and CPR 14PD.7 set out the criteria that the court must consider when determining an application to resile from an admission.

The court has a wide discretion, but must have regard to all the circumstances, including the overriding objective at CPR 1.1(2).

The relevant Rules for making and withdrawing admissions made before the commencement of proceedings are set out below:

CPR 14.1A

(1) A person may, by giving notice in writing, admit the truth of the whole or any part of another party’s case before commencement of proceedings (a ‘pre-action admission’).

(2) Paragraphs (3) to (5) of this rule apply to a pre-action admission made in the types of proceedings listed at paragraph 1.1(2) of Practice Direction 14 if one of the following conditions is met –

(a) it is made after the party making it has received a letter before claim in accordance with the Practice Direction (Pre-Action Conduct) or any relevant pre-action protocol; or

(b) it is made before such letter before claim has been received, but it is stated to be made under Part 14.

(3) a person may, by giving notice in writing, withdraw a pre action admission

(a) before the commencement of proceedings, if the person to whom the admission was made agrees;

(b) after commencement of proceedings, if all parties to the proceedings consent or with permission of the court.

(4) After commencement of proceedings–

(a) any party may apply for judgment on the pre-action admission; and

(b) the party who made the pre-action admission may apply to withdraw it.

(5) An application to withdraw a pre-action admission or to enter judgment on such an admission –

(a)   must be made in accordance with Part 23;

(b)   may be made as a cross-application.

The Practice Direction states in respect of withdrawing an admission:

14PD 7.1 An admission made under Part 14 may be withdrawn with the court’s permission.

14PD7.2 In deciding whether to give permission for an admission to be withdrawn, the court will have regard to all the circumstances of the case, including –

(a) the grounds upon which the applicant seeks to withdraw the admission including whether or not new evidence has come to light which was not available at the time the admission was made;

(b) the conduct of the parties, including any conduct which led the party making the admission to do so;

(c) the prejudice that may be caused to any person if the admission is withdrawn;

(d) the prejudice that may be caused to any person if the application is refused;

(e) the stage in the proceedings at which the application to withdraw is made, in particular in relation to the date or period fixed for trial;

(f) the prospects of success (if the admission is withdrawn) of the claim or part of the claim in relation to which the admission was made; and

(g) the interests of the administration of justice.

Pursuant to the overriding objective and dealing with the case justly and at proportionate cost includes, so far as is practicable –

(a) ensuring that the parties are on an equal footing and can participate fully in proceedings, and that parties and witnesses can give their best evidence;

(b) saving expense;

(c)  dealing with the case in ways which are proportionate –

I.    to the amount of money involved;

II.  to the importance of the case ;

III. to the complexity of the issues; and

IV. to the financial position of each party;

(c) ensuring that it is dealt with expeditiously and fairly;

(d) allotting it and appropriate share of the court’s resources, while taking into account the need to allot resources to other cases; and

(e)  enforcing compliance with rules, practice directions and orders.

The court helpfully set out the leading case authorities

Woodland v Stopford [2011] EWCA Civ 266

On the correct approach to the factors to be taken into account in the Practice Direction Ward LJ held at [26] that:

“These factors are not listed in any hierarchical sense nor is it to be implied in the Practice Direction that any one factor has greater weight than another. A judge dealing with a case like this must have regard to each and every one of them, give each and every one of them due weight, take account of all the circumstances of the case and, balancing the weight given to those matters, strike the balance with a view to achieving the overriding objective. Cases will vary infinitely and the weight to be given to the relevant factors will inevitably vary from case to case.”

The Court of Appeal noted that this was a case where the withdrawal of the admission was prompted, not by the emergence of new evidence, but by the defendants’ realisation (after a careful reappraisal of what was known) that those acting on their behalf when the admission was made had acted in error. Such a situation did not preclude the court from permitting withdrawal when exercising its discretion but sometimes the lack of new evidence may be the important consideration.

Moore v Worcestershire NHS Trust [2015] EWHC 1209 (QB)

In this case Bidder J. held in determining an application to resile from an admission, at [31] and [50/51]) that the court “should be aware of and look at [the] case against the background of the revitalised robustness of approach enunciated by the Court of Appeal and the Master of the Rolls in

Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537

and

Denton v TH White Ltd [2014] EWCA Civ 906

respectively, but I do not consider that an application to withdraw pre-action admissions necessarily imports the full factors that are relevant on an application to seek relief from sanctions under CPR3.9”. The Judge drew a distinction between the types of case where a party has made a procedural error such as in Denton and Mitchell and found no true analogy with an application to resile from a pre-action admission.

Bidder J. also found that where there are errors in the initial assessment of liability, rather than new evidence, it is not a bar to a successful application to resile. The grant of permission to withdraw is discretionary, with regard to all the circumstances of the case and the overriding objective (at [28]). He held at [29] in appropriate cases a distinction was to be drawn between a pure mistake and a tactical change of an admission. In the case there was no new evidence coming to light but the defendant’s representative was negligent in making an admission because they had misread expert opinion which had been provided to them. In fact the judgment makes clear that there were inconsistencies in the defendant’s admissions of causation and the Judge stated at [18] that due to those inconsistencies “if the learned master had not allowed the withdrawal of admissions, it would not just have resulted in a trial on quantum alone or an assessment of quantum alone, but inevitably the court would have had to have sorted out what the true position on medical causation actually was“.

Cavell v Transport for London [2015] EWHC 2283 (QB)

In this case William Davis J. dismissed an application to resile from an admission. He reminded himself that it was not for him to conduct a mini-trial. He gave weight to the fact that there was no explanation offered at all as to how the error in making an admission of liability had come about. He reflected further at [16] that so far as the interests of justice were concerned:-

“It cannot be in those interests to permit the withdrawal of an admission made after mature reflection of a claim by highly competent professional advisors when there is not a scintilla of evidence to suggest that the admission was not properly made. Were it to be otherwise civil litigation on any sensible basis would be impossible”.

Wood v Days Healthcare UK Limited [2017] EWCA Civ 2097

This case concerned a product liability claim. Sharp LJ considered what was contended for as “new evidence”, such as to bring it within scope for a party to be permitted to resile from their pre-action admission. The Judge concluded at [50] that an “entire “change in character and amount” of the claimant’s claim in 2012 (to adopt the language of her own solicitors) should, given all the circumstances, have justified the grant of permission to withdraw the pre-action admission)”. Such a significant increase in the value of the claim could be regarded as new evidence which could change the commercial decisions and perspective of the defendant, such that an admission could be withdrawn.

The Royal Automobile Club v Wright [2019] EWHC 913 (QB)

In this case liability was admitted and interim payments were made. The defendant’s insurers had invited the claim to be submitted through the MOJ Portal but this was declined on the basis that the claim was clearly in excess of £25,000. A detailed Schedule of Loss was provided subsequently, valuing the claim at in excess of £1,000,000. The defendant expressed surprise at the scale of the loss, putting the claimant on notice that it considered withdrawing its admission, which it subsequently did. The Master declined permission to withdraw.

On appeal, the Judge, William Davis J, agreed both with the decision made by the Master and the way in which he had reached it (at [23]). William Davis J. held that:

(1) The correspondence indicated that it was plain that this was not going to be a modest claim (at [13]);

(2) The claimant’s solicitors had done nothing to give any impression that the claim was of a modest size and indeed, had declined to enter the claim into the MOJ Portal (at [14]);

(3) There was prejudice to the claimant in that “she had had no cause to engage in any exercise of recollection as to how the accident happened. No investigation had been made as to the precise circumstances” (at [15]);

(4) There was delay in bringing the application to withdraw (at [16]) taking account of the overall timescales not just the time period after proceedings were issued;

(5) Also referring to his own decision in Cavell v Transport for London [2015] EWHC 2283 (QB) William Davis J held that so far as the administration of justice is concerned:

“If clear and unequivocal admissions which have led to a substantial investigation of quantum and to interim payments being made apparently without question can be withdrawn many months later, there will be real damage to the administration of justice. It undermines the basis on which parties to this type of litigation conduct themselves” (at [17])

(6) Furthermore it was held that when considering the prospects of success of the claim (or defence), and the strength that the claimant’s case is required to have in order to justify dismissing an application to withdraw an admission, it was not necessary for a claimant to prove that his/her case was bound to succeed ( at [21]).

The court was referred to two authorities in respect of the correct test to be applied  when considering actionable defects on the highway namely,

Joan Margaret Mills v Barnsley Metropolitan Borough Council [1992 ]EWCA Civ

and

Phyllis Ivy James v Preselli Pembrokeshire District Council & Hayley Thomas ( now Rees ) v Preselli Pembrokeshire District Council [1992] EWCA Civ.

Written by kerryunderwood

February 1, 2022 at 12:43 pm

Posted in Uncategorized

DEATH OF CLIENT: RIGHT TO BRING OR CONTINUE PROCEEDINGS

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This piece first appeared in Issue 37 of Kerry On Costs… And So Much More…, a weekly  publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.

By subscribing to the Newsletter, you are entitled to a free copy of my 1300-page, three volume book Personal Injury Small Claims, Portals and Fixed Costs and also a free copy of my book of Qualified One-Way Costs Shifting, Section 57 and Set-Off.

In  

Kimathi & Others v The Foreign Commonwealth Office [2016] EWHC

the High Court reviewed the principles relating to bringing an action on behalf of someone who has died.

Such an action is brought by the deceased’s estate and not in the name of the deceased.

The right to bring an action does not vest in administrators until they obtain Letters of Administration.

Foreign administrators have no right to bring an action until the claim is registered in England and Wales.

The issue of proceedings in the name of a deceased person is a nullity.

The court has no discretion to correct a nullity.

A claim brought on behalf of a deceased person must be struck out.

This was a group action against the Foreign and Commonwealth Office and in relation to one claimant, who was deceased, the defendant succeeded in applying to strike out that claim.

Where a person has made a will, any chose in action vests automatically in the executors at the moment of death: see for example paragraph 164 of the Court of Appeal decision in Ingall v Moran [1944] 1 KB 160.

If a person has not made a will and dies intestate, then any chose in action vests in the Public Trustee and remains in heror him until Letters of Administration are issued -Section 9 Administration of Estates Act 1925 as inserted by Section 14 Law of Property (Miscellaneous Provisions) Act 1994 – see Ingall v Moran [1944] 1 KB 160.

Ingall v Moran has been more recently considered, approved and followed, by the Court of Appeal on identical material facts in Millburn-Snell v Evans [2011] EWCA CIV 577, although Ingall has been disagreed with in the context of bankrupts.

In Millburn-Snell, the Court of Appeal said;

“…their claim was a nullity that must be struck out and could not be retrospectively validated by a grant of letters of administration. That is because whereas an executor derives his title to sue from the will and not from the grant of probate – and so can validly sue before obtaining a grant (although he will have to obtain it later in order to prove his title) — an administrator derives his title to sue solely from the grant of administration (see Chetty v. Chetty [1916] 1 AC 603, at 608, 609, per Lord Parker of Waddington).”

Upon, and not before, the Grant of Letters of Administration, the chose in action passes automatically from the President to the administrator.

There is judicial and academic debate as to whether the issuing of proceedings by an “administrator” prior to Letters of Administration renders the proceedings a nullity, incurably bad or constitutes an abuse of process giving the court a discretion to allow the matter to continue – see for example:

Eaton v Mitchells & Butler Plc [2015] EW Misc B26 (CC) (30 April 2015), Wrexham County Court.

In that case the court, in the context of a claimant’s bankruptcy, considered whether Millburn-Snell v Evans was wrongly decided, that is per incuriam, in that it followed Ingall v Moran without considering whether the law had been changed by CPR 17.4, which reads, so far as material:

“(1) This rule applies where (a) a party applies to amend his statement of a case in one of the ways mentioned in this rule, and

(b) a period of limitation has expired.”

“(4) The court may allow an amendment to alter the capacity in which a party claims if the new capacity is one which that party had when the proceedings started or has since acquired.”

In

Haq v Singh [2001] EWCA Civ 957,

a bankruptcy case, two members of the Court of Appeal stated, obiter, that CPR 17.4(4) had removed the effect of Ingall v Moran, the point being that in that case the claimant was actually suing in a personal capacity, however much he claimed to the contrary, and was not permitted to amend the proceedings to sue in a representative capacity that he had not formerly possessed, whereas CPR 17.4(4) now gave that power.

It is accepted that whatever the position is it applies “not only to issue proceedings knowing that the cause of action is not vested in you, but to continue them” – Munday v Hilburn [2014] EWHC 4496(Ch).

Also in Munday:

Of course, if the Court rules, despite the claimant’s advisers’ best endeavours, that the cause of action is not vested in him, then it would constitute an abuse for the claimant to continue with the action thereafter at any rate if the position could not be cured.”

Any which way it is bad news for a claimant, the estate and the solicitor.

Consequently it is vital that any client you act for in any potential litigation has a will.

As power passes on death to the executors it makes sense to have the solicitors conducting the litigation appointed as the executors as they can then seamlessly proceed with the matter.

This is an excellent, and entirely justifiable, ground for cross-selling and insisting that any private litigation client makes a will, and that it would be best to appoint the solicitors as executors.

This is even more the case where the matter is being conducted under a Conditional Fee Agreement; if your client dies intestate, or with a will where you are not the executor, you risk getting no fees.

It is perfectly proper to say to a client who is not prepared to make a will with the solicitor as the executor, at least in relation to the subject matter of the litigation or potential litigation, that you will not act under a Conditional Fee Agreement.

A solicitor acting under an old-fashioned hourly rate agreement is entitled to be paid for all work done up to the date of death, whatever the circumstances. This is under the quantum merit rule, which has no application in Conditional Fee Agreement cases – see Forde v Birmingham City Council [2008] EWHC 90105.

Remember that, in spite of the bleating of the consumer lobby and some judges, agreeing to act for a client under a Conditional Fee Agreement is a concession by the solicitor and a privilege for the client and the client must be expected to cooperate in relation to making a will.

Those judges and self-appointed consumer champions need to get out and ask real clients in real towns and cities whether they prefer to:

(1)         pay by the hour, win or lose; or

(2)         have a No Win No Fee Agreement.

The response generally is: –

(1)         0%;

(2)         100%.

Written by kerryunderwood

January 28, 2022 at 11:02 am

Posted in Uncategorized

INTERIM AND FINAL STATUTE BILLS AND CHAMBERLAIN BILLS – GETTING THE RETAINER RIGHT: 9

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This is the last article in a series of posts dealing with Getting the Retainer Right.

This piece first appeared in Issue 36 of Kerry On Costs… And So Much More…, a weekly  publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.

By subscribing to the Newsletter, you are entitled to a free copy of my 1300-page, three volume book Personal Injury Small Claims, Portals and Fixed Costs and also a free copy of my book of Qualified One-Way Costs Shifting, Section 57 and Set-Off.

INTERIM STATUTE BILLS

In

Winros Partnership v Global Energy Horizons Coporation [2021] EWHC 3410 (Ch) (16 December 2021)

the Chancery Division of the High Court held that in a no win no fee Conditional Fee Agreement the natural break principle could never apply to allow the solicitors to deliver an interim statute bill, as no bill could be determined or delivered until the end of the claim, when the case had been won.

Thus, there can never be interim statute bills in a no win no fee agreement, but that leaves open the question of interim statute bills in a no win lower fee agreement.

Discounted conditional fee agreements and interim statute bills

In Sprey v Rawlison Butler LLP [2018] EWHC 354 (QB)

the court considered whether monthly bills delivered by a solicitor to his client under a discounted conditional fee agreement were “statute bills”, and therefore capable of detailed assessment under section 70 of the Solicitors Act 1974.

A solicitor’s retainer is an entire contract and usually the solicitor is entitled to be paid by the client only at the end of the retainer, such as at the conclusion of the litigation.

There are two exceptions to this:

  • where the solicitor and client have agreed that the solicitor may render interim bills, and that agreement may be inferred from conduct;”
  • at a natural break in lengthy litigation (Re Romer & Haslam [1893] 2 QB 286).

In the absence of express terms as to the rendering of interim bills, agreement may be inferred from conduct, such as where the solicitor renders interim bills which the client accepts and pays (Abedi v Penningtons [2000] 2 Costs LR 205).

Here, the court said that the Conditional Fee Agreement did not permit or anticipate the rendering of interim statute bills.

Clause 11.1 under the section “Right to apply for an assessment” indicated that the invoices were not statute bills, as it said that the client had the right to challenge the bills under Section 70 of the Solicitors Act 1974, which was described as the “right to assessment by the court of the amount of the fees, Success Fee and/or Disbursements which are payable by the client under this agreement”.

Unless those three items, that is fees, success fee and disbursements, were read separately, that is disjunctively, then the right to challenge them arose only at the end of the case.

Thus the interim bills were not statute bills, but rather requests for payment on account, or, in the circumstances, Chamberlain bills – see below.

There were other clauses which referred to fees being payable upon the final result of the claim.

A bill rendered by a solicitor to his client may be one of three things:

  • a “statute bill” or, if the solicitor is entitled to render interim bills, an “interim statute bill”, that is, a final bill for the period that it covers, which complies with the requirements of the Solicitors Act 1974 can be sued on by the solicitor, under section 69, and which is capable of detailed assessment under section 70;
  • a request for payment of a sum on account;
  • a “Chamberlain bill”, that is a series of bills which become a statute bill only upon delivery of the last bill, after Chamberlain v Boodle & King [1982] 1 WLR 1443.

A statute bill cannot be amended without the consent of the parties or an order of the court, which will be granted only in exceptional circumstances (Polak v Marchioness of Winchester [1956] 1 WLR 819).

Statute bills are final bills in respect of the work that they cover, in that there can be no adjustment “in light of the outcome of the business”.

They are complete, self-contained bills of costs to date (Bari v Rosen [2012] EWHC 1782 (QB)).

Applications by a former client for an order for detailed assessment of the solicitor’s bill under section 70 of the SA 1974 are subject to time limits, as follows:

  • If the application is made more than 12 months after the client has paid the bill, no order can be made (section 70(4)).

If the application is made more than 12 months after the bill is delivered, or after the bill has been
paid (but within 12 months of payment), the client must show special circumstances (section 70(3))

  • If the application is made within 12 months of delivery of the bill, the court may impose terms when making an order for assessment, unless the application was made within one month of delivery, when it may not (section 70(2)).

If the client can show that the invoice or bill was no more than a demand for a payment on account, then he or she will be able to await the production of a statute bill and then make a request for an assessment within the time limits set out in the SA 1974.

 In Richard Slade & Co Solicitors v Boodia and another [2017] EWHC 2699 (QB)

the court held that bills submitted by the claimant firm had not been statute bills.

The firm had invoiced monthly for profit costs but then invoiced separately, and later, for disbursements incurred in periods already billed.

To constitute a bill of costs under section 70 of the Solicitors Act 1974 an interim statute bill had to represent all of the costs incurred or payable in respect of the period of the bill to enable the client to decide whether to exercise their right to challenge the amount.

At paragraph 33 the court said:

“The period within which a client can seek an assessment of costs runs from delivery of the bill. On the facts of this case none of the bills contained both profit costs and disbursements. On the defendant’s argument time for applying for an assessment of the bills runs from the date of delivery of each monthly profit costs bill. The court would be asked to make an assessment without knowing what disbursements had been paid or were liable to be paid by the solicitor in respect of the same period. In my judgment such an exercise would be contrary to the provisions of s.70 which by s.70(5) give the court not the parties a discretion to order separate assessments of profit costs or other costs within a bill. Further, as Mr Dunne submitted, to undertake an assessment of profit costs without knowing what disbursements were for the same period may deprive the client [of] the information on which to decide whether to challenge the profit costs bill for, for example, duplication of work by solicitor and counsel.”

And at 56:

“The Master was bound by statute as explained in authority to hold that an interim statute bill must contain a bill of all costs including profit costs and disbursements in respect of agreed periods of time. Any practical difficulties which this requirement may cause to the solicitor are outweighed by the certainty given to the client, safeguarded by statute and authority, of knowing the total amount of costs they are being asked to pay. The client needs to know the total costs incurred over a certain period to enable them to form an evidenced based view of whether to exercise their right under s.70 to challenge the bill. The right of a client to apply for assessment under s.70 is time limited. After expiry of the specified time limit that right is lost as is asserted by the defendant in respect of the majority of bills in this case. The treatment of incomplete bills of costs as statutory bills could lead to a multiplicity of applications under s.70 merely to preserve the client’s right to apply for assessment”.

Comment:

It is unclear from the judgment as to whether a bill delivered during a no win lower fee case can ever be a statute bill, and it is clear that a bill delivered during a no win no fee Conditional Fee Agreement can never be a statute bill – see Winros Partnership v Global Energy Horizons Coporation [2021] EWHC 3410 (Ch) (16 December 2021).

Although the court said that here the wording of the Conditional Fee Agreement was inconsistent with the ability to deliver interim statute bills – a highly questionable conclusion which disagreed with the decision of the Costs Master – it is open to question whether a different wording would have made any difference.

This is due to the line of authorities that says that a client does not need to decide whether to challenge the bill until she/he knows the full amount, which in a conditional fee case will not be until the end.

That makes no sense.

A client paying an hourly rate, win or lose, can be subject to interim statute bills even though s/he will not know until the end of the case how much the total will be.

Why should a no win lower fee client, paying a lower sum unless the case is won, be in a better position? 

In any event, the client can calculate what the fee would be in the event of success. 

Here the discounted fee was 40% of the full fee, with a 50% success fee.

So, if an interim statute bill of £40 is delivered, then the client knows the extent of the costs if the case is won:

£

Balance of fee                                                                      60

50% success fee on the full fee of £100                         50

Total                                                                                     110

This is a wrong decision.

 Solicitors Act assessments: interim statute bills: Conditional Fee Agreements

In Richard Slade and Company v Boodia and Boodia [2017] EWHC 2699 (QB)

the Queen’s Bench Division of the High Court, in an appeal from the Senior Courts Costs Office, upheld the Cost Master’s finding that interim statute bills must include disbursements.

As they had not done so here, they were not interim statute bills, and thus were not final bills for the period described, because not all of the costs were included in the bill.

Consequently the clients were not time-barred from seeking Solicitors Act Assessments for all 61 invoices involved.

The term “interim” statute bill is a little confusing as in fact the whole point of such a bill is that it is final and complete for the period it covers. That finality and completeness allows solicitors to sue on the bill pursuant to the provisions of Section 69 of the Solicitors Act 1974, but prevents the solicitor from charging any further fees for that period.

Thus finality and certainty is there for both parties and a client can decide whether or not to pay or dispute the bill.

The Shorter Oxford English Dictionary definition of “interim” is:

 “A thing done in an interval; an interlude”

 Thus the description is technically correct as, in the absence of contractual entitlement to the contrary, an interim statute bill can only be delivered when there is a natural break, or interlude, in the proceedings.

Most solicitor and client retainers create a contractual right to deliver an interim statute bill at any time.

However the other dictionary definition of “interim” is:

 “A temporary or provisional arrangement”

and that is where the potential confusion arises as in relation to that period, the whole point is that the bill is a final and permanent arrangement for that time.

The courts have long realized that the wording is somewhat unfortunate. In

 Bari v Rosen (trading as RA Rosen & Co Solicitors) [2012] 5 Costs LR 851

the court said

“15. … a solicitor may contract with his client for the right to issue statute bills from time to time during the currency of the retainer. Such bills are known as “interim statute bills”. They are nevertheless final bills in respect of the work they cover, in that there can be no subsequent adjustment in the light of the outcome of the business. They are complete self-contained bills of costs to date.”

Here the High Court adopted that wording and reasoning.

It is important to note the wording that “there can be no subsequent adjustment in light of the outcome of the business.”

Thus if a bill is genuinely an interim statute bill charged at the discounted rate in a No Win Lower Fee Agreement, then there can be no subsequent further charge. 

Here the court did briefly refer to the situation in a Conditional Fee Agreement case saying: 

“The only potentially practical difficulty would be in a CFA case. Until the outcome of the case was known the client’s liability for costs could not be determined. However, where a decision was to be made between an interpretation that caused inconvenience to a solicitor and one which caused prejudice to a client, the client’s interest prevails.”

The point here is that generally a solicitor can deliver an interim statute bill, as they will know the work done to date and any disbursements incurred, and thus a final interim statute bill can be delivered and the client has to pay it and the solicitor can sue on the bill if it is not paid.

Obviously that cannot be done in a conditional fee case, as the final bill for that period will not be known until the case is concluded.

It is also most important that solicitors in conditional fee cases, whether No Win No Fee or No Win Lower Fee cases, make it clear when delivering a disbursements only bill, that it is not an interim statute bill. Otherwise it may be found that the solicitor can deliver no further charges for that period, and thus cannot charge profit costs.

Proper wording of the bill avoids that problem, but creates another problem, namely that the solicitor cannot sue on an interim on account bill as compared with an interim statute bill.

Thus it is essential to obtain payment on account of such costs, and then an interim on account bill can be delivered and the costs transferred from client account to office account to discharge that bill.

Generally, care needs to be taken when delivering an interim statute bill to ensure that all disbursements to date are included.

There is an obvious problem in relation to counsel’s fees in that counsel may be carrying on work generally and not have delivered a fee note for work done to date.

This is recognized in the judgment where the court says:

“54. Master James recognised in paragraph seven of her judgment the practical difficulties of obtaining and including disbursements such as fees for counsel and experts to coincide with the period in time to which a solicitor’s fees relate. The Master recognised that her answer that interim non-statute bill could be rendered carried the disadvantage by reason of Section 69 their payment cannot be enforced by taking proceedings.” 

Depending upon the circumstances of the funding arrangement and the case, sometimes solicitors will want an interim bill to be a final statute bill for that period, and sometimes they will not.

The benefit of having a final interim statute bill is that the solicitor can sue on it and the client has strict time limits in which to challenge the bill under the Solicitors Act 1974.

The disadvantage from the solicitor’s point of view is that they cannot revisit the work done in that period, and thus it must be a carefully calculated and costed bill for work done during that period.

Thus if a solicitor, in a long ongoing matter, simply wishes to bill say £2,000.00 a month and then adjust the total each year, or at a natural interlude, or at the end of the case, then the solicitor must ensure that it is not an interim statute bill.

Perhaps the most significant area where solicitors must ensure that the bill is not an interim statute bill is where they are acting on No Win Lower Fee basis and thus charging the client the discounted fee as the matter proceeds, but with the right to charge the full primary fee, plus a success fee if appropriate, in the event of a successful outcome.

Let us assume the solicitor is charging £400.00 an hour, discounted to £200.00 an hour in the absence of access, and with a 100% success fee.

10 hours’ work is done and the matter is continuing. 

The correct level of the bill is £2,000.00, reflecting the discounted rate, payable even in the event of defeat.

However, the solicitor will potentially be charging a further £600.00 an hour for that work, being the primary rate of £400.00 an hour plus a 100% success fee of £400.00 an hour, bringing the total up to £800.00 an hour, of which £200.00 per hour has been paid.

In those circumstances, which will become increasingly common in general civil and commercial work once fixed costs are extended, it is crucial that the bill delivered is not a statute bill.

Such bills are in fact “on account” bills and this should be made clear in the text of the bill.

Furthermore the bills should not refer to Solicitors Act assessments as that indicates that they are statute bills. That was the case here but the court held that it “would be reluctant to make a finding of a fatal flaw in the retainer” for that reason.

Where there is a series of interim, and not statute, bills delivered as part of a running account in respect of one piece of work, then the time for requesting assessment, and the time from when the solicitor can sue on the bills, runs from the date of delivery of the final, statute, bill.

Such a bill is known as a Chamberlain Bill, following the case of

Chamberlain v Boodle and King [1982] 3 All ER 188. 

Here the court examined the authorities and stated that in order for a bill to be a statute bill, whether interim or final, it “must be complete, self-contained and final in relation to costs to date.”

A solicitor may render a bill and a client may pay that bill without it constituting a statute bill – see paragraph 22.

That is what is happening when a bill for the discounted element of the fee in a No Win Lower Fee Agreement is delivered and paid.

The assumption, as here, is that a solicitor will want any interim invoice to be an interim statute bill so that it can be sued upon and so that the client’s time for applying for an assessment starts to run.

However with conditional fee cases exactly the opposite is true.

In practice

Do not have the wording about the right to a Solicitors Act 1974 assessment on an “on account” bill.

Although it is not strictly necessary to include all disbursements for the relevant period in an “on account” bill, it is good practice.  It also avoids a client saying something to the effect of “I knew there would be more legal costs payable if I won, but I thought that all the disbursements were already dealt with as I was paying those as we went along, win or lose.” 

Include in an on account bill wording along the following lines:

This is an interim on account bill. It is not a final bill for the work done during the period covered by this bill.

 We reserve the right to deliver an additional, final, bill at the end of the matter.

Your time for challenging our costs and for applying for an assessment under Sections 70,71 and 72 of the Solicitors Act 1974 does not start until that final bill has been delivered.

We will advise you of your rights when we deliver that final bill.”

The following wording could be used for a Conditional Fee Agreement case, suitably adapted to effect the terms of the Conditional Fee Agreement:

 “ This Interim on account bill represents the fees payable in any event, whether you win or lose your case and full details of the work done [are contained in this on account bill][are available on request][are contained in the attached schedule] and please ask us if you want any more information about that work.

 These fees are calculated at the discounted rate in the Conditional Fee Agreement. If the case is won then you pay the full primary rate, together with a success fee”

 [As the discounted rate is 50% of the full primary rate, then if you win the case you will pay the same sum again, being the difference between the primary rate and the discounted rate.

In addition, you will pay a success fee of []% on that full primary rate giving a further fee of [insert amount].

So, if you win, you will pay a further [Insert amount] in fees over and above the amount contained in this bill.

[However, the total charged to you, including this bill, is capped at []% of [damages][damages recovered].

This bill [does][does not] include all disbursements to date.

Theoretically, I think it possible to deliver a final interim statute bill for the discounted fee in a Conditional Fee Agreement, which would finalize the client’s liability in the event of defeat and enable the solicitor to sue on that element of the bill.

An additional bill could then be delivered on the basis that that is a free standing contractual entitlement to the balance of the full primary fee, plus the success fee.

However, given the fact that the Solicitors Act did not envisage Conditional Fee Agreements, and there is no authority on the point, I advise against such a course of action.

In any event if a solicitor is suing a client for the discounted fee part way through the case, it is hard to see how the solicitor client relationship could be one allowing the solicitor to continue to act until the end of the case.

Written by kerryunderwood

January 27, 2022 at 11:24 am

Posted in Uncategorized

COSTS INFORMATION UPDATES INCLUDING DISBURSEMENTS – GETTING THE RETAINER RIGHT: 8

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This is the eighth article in a series of posts dealing with Getting the Retainer Right.

This piece first appeared in Issue 36 of Kerry On Costs… And So Much More…, a weekly  publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.

By subscribing to the Newsletter, you are entitled to a free copy of my 1300-page, three volume book Personal Injury Small Claims, Portals and Fixed Costs and also a free copy of my book of Qualified One-Way Costs Shifting, Section 57 and Set-Off.

It is a requirement that the client is given costs information throughout the case, even if, on the face of it, the client is never going to have to pay anything, for example because they have a CFA-Lite Agreement, or they have Before the Event insurance or whatever.

In fact, there is always a potential liability to the client, for example if they fail to cooperate, or give a solicitor incorrect information, or instruct other solicitors, or carry on with the case without a solicitor, in which case you can charge the client in any event, and it is crucial to have that potential liability to maximize the chance of the client co-operating.

The consequences of failing to give the client costs information throughout the case can be severe; if the failure is such that it means that the client is not primarily liable for all or part of the costs, then even if the client never objects and never complains about not receiving costs information throughout the case, it gives the paying party an opportunity to challenge the bill under the indemnity principle.

Following the case of

Butt v Nizami [2006] EWHC 159 (QB),

the indemnity principle does not apply in fixed costs cases, but it continues to have full force in non-fixed costs cases. It does apply in fixed recoverable costs cases funded by way of a Damages Based Agreement.

However, even in a fixed costs case, the client can challenge the bill and if no, or insufficient, costs information is given throughout the case, then that opens the bill up to a challenge from one’s own client, irrespective of the fact that the indemnity principle does not apply in fixed costs cases.

That is a Solicitors Act 1974 matter and nothing to do with the indemnity principle.

If a client is paying by the hour, win or lose, then regular bills should be delivered as the matter goes on and that will amount to costs information.

A close eye should be kept on how the costs to date relate to the estimate given, and any increase in the estimate should be notified to the client at the earliest opportunity, with a detailed explanation as to why the estimate has increased.

This should always be accompanied by an offer to meet the client free of charge to discuss the proposed increase in the estimate.

In particular, a close eye should be kept on disbursements and counsel’s fees, as these are items which are often not thought through at the outset with the same care as the solicitor’s charges.

Likewise, a close eye should be kept on the situation in relation to any After-the-Event insurance.

That is three close eyes needed J.

In any event there is a professional duty to keep the client fully informed as to their potential exposure to adverse costs in the event of defeat.

Part 36 offers should be carefully monitored and all updated costs information throughout the case should refer to any Part 36 offers made, and the consequences of failing to beat the Part 36 offer or whatever.

There is now no specific frequency with which costs information must be given to the client, but I suggest that it be done each calendar month as part of a regular file review.

The information can be kept quite brief, along the lines of:

To date our costs total [           ], but under the terms of the agreement between us we have promised to charge you no more than [           ] including VAT, of any damages that you receive, and so our costs will be capped at that sum.

Obviously we will not know the amount of the costs until the claim is finished and we know how much damages you will receive.”

Written by kerryunderwood

January 26, 2022 at 9:52 am

Posted in Uncategorized

ESTIMATES AND QUOTATIONS – GETTING THE RETAINER RIGHT: 7

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This is the seventh article in a series of posts dealing with Getting the Retainer Right.

This piece first appeared in Issue 36 of Kerry On Costs… And So Much More…, a weekly  publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.

By subscribing to the Newsletter, you are entitled to a free copy of my 1300-page, three volume book Personal Injury Small Claims, Portals and Fixed Costs and also a free copy of my book of Qualified One-Way Costs Shifting, Section 57 and Set-Off.

The Solicitors Code of Conduct states at Paragraph 8.7:

You ensure that clients receive the best possible information about how their matter will be priced, and, both at the time of engagement and when appropriate as their matter progresses, about the likely overall cost of the matter and any costs incurred.

Costs is defined as meaning fees and disbursements.

That is about a vague as it gets, and as it will be the court deciding these matters, the key is to follow existing case law.

A quotation is a fixed price, and provided that the client has clearly accepted that fixed price quotation, there is little potential for disagreement.

Both parties benefit from the certainty of the arrangement and the solicitor benefits from being able to deliver an invoice for the total sum at the outset and the money can be paid straight into office account before any work is done.

This can apply in any type of work, and in non-contentious work it is common and straightforward.

Thus the solicitor may agree to prepare a Will for £300. An invoice can be delivered in advance.

In litigation, where recovery will be sought from the other side if the client is successful, care needs to be taken to avoid falling foul of the indemnity principle.

Let us suppose the solicitor agrees a fee of £10,000 for a piece of work. Under the indemnity principle that is the maximum that the other side will have to pay, even if the matter becomes protracted.

The answer is to have a No-Win Lower-Fee Conditional Fee Agreement, with the lower fee being the fixed fee, that is £10,000 in the example here.

The full, undiscounted rate can be the full hourly rate, which then allows recoverability in full in the usual way from the other side.

The agreement can be structured on CFA-Lite principles, which means that, even in the event of success, the client does not have to pay more than the fixed sum of £10,000 that has been agreed.

There are endless possibilities as far as the solicitor and client agreement is concerned, but the main points to note are that a quote is a fixed price, and that absent a Conditional Fee Agreement that fixed price will be the maximum that any other party has to pay.

It is important to set out clearly what work is covered by the quote; this is to avoid “mission creep” whereby the client seeks to get the solicitor to do work not envisioned when the price was agreed.

It is also important to deal with what happens if the client disinstructs the solicitor – will the full fee still be payable?

From a commercial point of view, solicitors should effectively build in a contingency when fixing a price for uncertain work such as litigation.

Estimates

Where a fixed price is not agreed, then the solicitor should provide an estimate of the cost of the work at the outset and estimates cause far more problems than quotations.

In

Harrison v Eversheds LLP [2017] EWHC 2594 (QB)

the court said:

An estimate is to be distinguished from a quotation of fees: an offer which is accepted. An estimate is what it says. It gives an idea, which from a professional firm can be taken as reasonably and carefully made taking into account all relevant considerations, of what the future costs of work on a case are likely to be. A solicitor cannot be held to be restricted to recovering the exact sum set out in an estimate. However, a client is entitled to place some reliance on the estimate. The nature, degree and reasonableness of that reliance will no doubt be one factor in the view taken on an assessment under Section 70 of the Solicitors Act 1974 of how much more than the estimate it is reasonable for the client to pay.”

Frequent problems with estimates are that they are:

  • inadequate;
  • unclear;
  • not properly explained;
  • not kept up to date.

One of the major reasons why estimates are inadequate is that the solicitor does not wish to scare off a client, and therefore, consciously or subconsciously, underestimates.

In contentious work the lawyer should discuss the matter with another lawyer before giving an estimate.

Consideration should be given as to whether the estimate should be given for the entire action, or broken down into stages, which will give a total for the whole action, but will address the minds of both the solicitor and the client to the cost of each stage.

This tends to result in more accurate estimates as it forces the solicitor to consider the work likely for each stage, rather than just plucking an overall figure out of the air. It also fits in with the phases approach to costs budgeting.

Solicitors are now used to costs budgeting and the best way of getting estimates right is to look at what has happened in other similar cases, and actual budgets from other cases are a useful tool.

It is essential to make it clear that the estimate is indeed an estimate and not a fixed price quotation.

Wording should be along the following lines:

This is an estimate and it is not a fixed price quote. You may have to pay us more than this, depending on what happens during the case.

We will keep the estimate under review and will revise it if we think that the costs are likely to be higher, or lower, than in this estimate.

If that happens, then we will discuss with you the reasons for the revision.

Estimates should be considered at the regular file review, and in my firm that is each calendar month. As we have seen, there is no specific requirement now under the Solicitors Code of Conduct , but if it is done each calendar month as part of a regular file review, then the client will have no cause for complaint.

In heavy and fast moving litigation, even a month be too long a period between reviews.

If there needs to be a significant revision of the estimate, then the solicitor will need to justify that by reference to what has changed since the original estimate was given, and whether the cause of the change could have been foreseen at the beginning of the case.

If an estimate is clearly an estimate and not a fixed priced quote, the solicitor will not be held to it, but it will be taken into account when the court considers what is reasonable for the client to pay.

No Estimate

In

Brookes (t/a Brookes & Co) v Atlantic Marine & Aviation LLP [2018] EWHC 1168 (Comm) (28 February 2018)

the Commercial Court held that a solicitor could bill her client, and the client was liable for the relevant fees, even though the solicitor had not provided any fee estimate before the work commenced.

The solicitor had acted for the client in a number of matters, and at the beginning of their relationship, the client had emailed the solicitor stating that, unless it was necessary to deal with the matter urgently, the client required a purchase order with a fee estimate before any work was commenced.

The footer to the client’s email stated that it did not constitute any offer, acceptance or contract and that no contract would be binding and no order placed or accepted without a signature on behalf of the client.

The solicitor replied stating that it was difficult to see how using purchase orders could work in practice and that it was difficult to give a firm estimate without more information about the claim and sent the client a Letter of Engagement and standard terms of business and the client gave instructions for work to be carried out and the solicitors delivered bills for that work.

The client then failed to pay the last bill and argued that a purchase order and estimate were conditions precedent to any liability for fees.

The court held that the footer on the client’s email deprived it of any contractual effect and that it needed to look at subsequent events and noted that the client had not responded to the solicitor’s query about how the purchase order system could work in practice and had instructed the solicitor to do work without further mention of purchase orders.

Furthermore the solicitor’s Letter of Engagement made it clear that the solicitor’s terms and conditions of business applied; it provided that if they were not signed and returned, then they were deemed to have been accepted.

Consequently there was no condition of precedent to the client’s liability for the bills and nor was there any implied retainer.

The solicitor’s terms governed the relationship and the solicitor was only obliged to use best endeavors to provide a costs estimate.

The appropriate way to resolve any dispute about the quantum of the outstanding bill was to send it for detailed assessment.

In

Garbutt v Edwards [2005] EWCA Civ 1206

the Court of Appeal rejected an argument that a failure to give an estimate rendered the retainer unlawful and said that it was merely a factor for the Costs Judge to take into account.

That was a between the parties assessment, where the paying party was seeking to avoid payment on the basis that if there was no lawful retainer, then the client had no liability to pay the solicitor, and therefore the indemnity principle meant that the third party was not liable.

Generally, courts are likely to be harder on solicitors in solicitor and own client assessments where no estimate has been given, as compared with a losing third party seeking to achieve a windfall.

Inadequate Estimates

Factors to be taken into account in deciding what sum is reasonable for the client to pay include whether the client relied upon the estimate and in what way the client relied upon it.

Whether there should be a reduction, and if so to what extent, is a matter of judgment for the court and specific deductions can be made to reflect the impact which an erroneous and uncorrected estimate had on the conduct of the client.

The court should consider what deduction, if any, is necessary to do justice between the parties but it is not the proper function of the court to punish the solicitor for providing a wrong estimate, or for failing to keep it up to date.

The leading cases on these issues are a series of cases known as

Mastercigars Direct Ltd v Withers LLP [2007] EWHC 2733 (Ch), [2009] EWHC 1295 (Ch) and [2009] EWCA Civ 1526.

In those cases the court said that the client did not have to go so far as to show the ingredients of an estoppel against the solicitor.

One part of my reasoning was that it would often be difficult for a client to show that “he would have” acted differently but the client may be able to show “it is possible he might have approached the litigation differently” if he had been given a more accurate estimate. Thus, my formulation of what is required does not go so far as to require the client to prove on the balance of probabilities that he would have acted differently.”

In the judgments the courts also made it clear that the approach apparently adopted in

Wong v Vizards (a Firm) [1997] 2 Costs LR 46

whereby Costs Judges would allow a margin of 15% or 20% on top of the estimate was wrong.

… the adoption of a margin approach greatly simplifies the steps which a Costs Judge needs to take when carrying out a detailed assessment of a bill, which has been preceded by a lower estimate… It is obvious, at least to me, that the adoption of a margin approach as the conventional approach in the majority of cases pays scant, if any, attention to the legal process which I attempted to describe in my earlier judgment…”

Written by kerryunderwood

January 25, 2022 at 11:00 am

Posted in Uncategorized

SMALL CLAIMS PORTAL: USELESS, BROKEN AND FARCICAL

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In a farce worthy of Brian Rix, the creators of the Small Claims Portal, frequently and wrongly described as the Whiplash Portal, want to know why it is not working.

In January 2022, minutes from the Official Injury Claim – the Orwellian title needed because it is a fraud on the English and Welsh public – chaired by the Ministry of Truth, aka Ministry of Injustice, show that research has been commissioned into the failure.

 In a system for use by litigants in person, but so complex that I predict that in due course the Official Court of Appeal will struggle to make sense of it, almost no litigants in persons are using it.

For those of you unfamiliar with this shambles, this is a Small Claims Portal for road traffic accidents valued at less than £10,000, or less than £5,000 for the injury. It came in on 31 May 2021, and has proved to be an incomprehensible disaster, as predicted by everyone who does this type of work.

At the same time damages for whiplash injures were reduced by around 80%.

A combination of these factors means that for many people, it is not worth bringing a claim, demonstrated by the 75% fall in claims.

The advisory group was surprised at the lack of claims management company involvement, just 101 claims out of 41,000 in the first quarter.

That is not even one organized claims management company; that must be cases for mates, employees or yourself.

Claims management companies have pulled out of this work entirely; they know a dodo when they see one.

Dear Advisory Group – you do not need to do any research – there is no worthwhile profit for claims management companies and the system is massively too complex for litigants in person.

A system designed to drive out lawyers from the process and force litigants to act for themselves or through claims management companies has resulted in 90% of claims being brought through solicitors.

This compares with a figure of 90% of claims being brough through solicitors prior to the change.

It also compares with almost exactly the same pre- and post-figures in the Republic of Ireland when it brought in a similar system.

The group’s naivety, putting it politely, is astonishing.

It assumed that individuals with potential whiplash claims would be diverted to the portal by insurers, that would be the insurers who have campaigned successfully to all but abolish whiplash claims.

In another report, the I Am A Criminal Self-Reporting Portal Advisory Committee, expressed surprise that criminals are not routinely reporting their crimes to the police on this portal.

The Really, Really Honesty Official Injury Claim tweeted in January 2022 that anyone injured in a car accident “can claim without specialist knowledge”, a clear lie given their own statistics.

If it was that easy, why do 90% of claimants go to solicitors, knowing that they will have to pay 25% to 40% of their damages to those solicitors now that costs cannot be claimed from the defendant’s insurance company?

Grim humour was added in that the portal fails when an insurer offers £0, as compared with £0.00.

In a Comedy Club statement the Super Mega Official Injury Claim said:

“As a practical solution, if compensators are able to inform their handlers to insure zero values are entered as £0.00 until the fix is implemented, claims can continue through the process normally.”

Phew! That is a relief!

I always like to give helpful template letters, so here is one to your client:

Dear Client

I am delighted that the insurance company has offered £0.00, rather than £0, which means that you can continue your matter on the portal and get nothing, rather than having to wait to get nothing for your injuries.

It may be that this portal’s days are numbered.

The new Master of the Rolls is very keen on portals for everything and frequently refers to the Small Claims Portal; it may be that his advisors have suggested that this is not the best example.

The disaster that has been this portal threatens the development and modernization of the rest of the Civil Justice System.

By the way, if you think hindsight is a wonderful thing, I predicted every aspect of this in my 2017, three volume, 1300-page work Kerry On… Personal Injury Small Claims, Portals and Fixed Costs – available for £50 here.

Written by kerryunderwood

January 24, 2022 at 12:23 pm

Posted in Uncategorized

TYPES OF CONDITIONAL FEE AGREEMENTS – GETTING THE RETAINER RIGHT: 6

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This is the sixth article in a series of posts dealing with Getting the Retainer Right.

This piece first appeared in Issue 36 of Kerry On Costs… And So Much More…, a weekly  publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.

By subscribing to the Newsletter, you are entitled to a free copy of my 1300-page, three volume book Personal Injury Small Claims, Portals and Fixed Costs and also a free copy of my book of Qualified One-Way Costs Shifting, Section 57 and Set-Off.

Set out below are Documents 11 – 49 from my Documents, Videos, Agreements and Advices Menu, which gives you an idea of the different types of Conditional Fee Agreements.

These are available for sale – contact me on 01442 430900 or kerry.underwood@lawabroad.co.uk

CONDITIONAL FEE AGREEMENT (CFA)

CONDITIONAL FEE AGREEMENT – Personal Injury NWNF = No Win No Fee

11. NWNF without success fee

12. NWNF – without success fee – no charge to client beyond recovered costs

13. NWNF – without success fee; charge to client capped at 25% of damages including ATE premium

14. NWNF – without success fee; charge to client capped at 25% of damages excluding ATE premium

15. NWNF – with success fee

16. NWNF – with success fee; all charges to client capped at 25% of damages including ATE premium  

17. NWNF – with success fee; all charges to client capped at 25% of damages excluding ATE premium

18. No Win Lower Fee – without success fee – no charge to winning client beyond recovered costs

19. No Win Lower Fee – without success fee – charge to winning client capped at 25% of damages including ATE premium

20. No Win Lower Fee – without success fee – charge to winning client capped at 25% of damages excluding ATE premium

21. No Win Lower Fee – with success fee

22. No Win Lower Fee- with success fee; all charges to winning client capped at 25% of damages including ATE premium

23. No Win Lower Fee- with success fee; all charges to winning client capped at 25% of damages excluding ATE premium

CONDITIONAL FEE AGREEMENT – Clinical Negligence

24. No win – no fee (NWNF) without success fee

25. NWNF – without success fee – no charge to client beyond recovered costs

26. NWNF – without success fee; charge to client capped at 25% of damages including ATE premium

27. NWNF – without success fee; charge to client capped at 25% of damages excluding ATE premium

28. NWNF – with success fee

29. NWNF – with success fee; all charges to client capped at 25% of damages including ATE premium

30. NWNF – with success fee; all charges to client capped at 25% of damages excluding ATE premium

31. No Win Lower Fee – without success fee – no charge to winning client beyond recovered costs

32. No Win Lower Fee – without success fee – charge to winning client capped at 25% of damages including ATE premium

33. No Win Lower Fee – without success fee – charge to winning client capped at 25% of damages excluding ATE premium

34. No Win Lower Fee – with success fee

35. No Win Lower Fee- with success fee; all charges to winning client capped at 25% of damages including ATE premium

36. No Win Lower Fee- with success fee; all charges to winning client capped at 25% of damages excluding ATE premium

CONDITIONAL FEE AGREEMENT – General Civil/Commercial Litigation

37. No win – no fee (NWNF) without success fee

38. NWNF – without success fee – no charge to client beyond recovered costs

39. NWNF – without success fee; charge to client capped at [  ]% of damages including ATE premium

40. NWNF – without success fee; charge to client capped at [  ]% of damages excluding ATE premium

41. NWNF – with success fee

42. NWNF – with success fee; all charges to client capped at [  ]% of damages including ATE premium

43. NWNF – with success fee; all charges to client capped at [  ]% of damages excluding ATE premium

44. No Win Lower Fee – without success fee – no charge to winning client beyond recovered costs

45. No Win Lower Fee – without success fee – charge to winning client capped at [  ]% of damages including ATE premium

46. No Win Lower Fee – without success fee – charge to winning client capped at [  ]% of damages excluding ATE premium

47. No Win Lower Fee – with success fee

48. No Win Lower Fee- with success fee; all charges to winning client capped at [          ] of damages including ATE premium

49. No Win Lower Fee- with success fee; all charges to winning client capped at [          ] of damages excluding ATE premium

Written by kerryunderwood

January 24, 2022 at 10:06 am

Posted in Uncategorized

SECTION 57 – CONTINGENCY FEE AGREEMENTS CONTINGENCY FEE AGREEMENTS COMBINED WITH CONDITIONAL FEE AGREEMENTS DAMAGES-BASED AGREEMENTS – GETTING THE RETAINER RIGHT: 5

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This is the fifth article in a series of posts dealing with Getting the Retainer Right.

This piece first appeared in Issue 36 of Kerry On Costs… And So Much More…, a weekly  publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.

By subscribing to the Newsletter, you are entitled to a free copy of my 1300-page, three volume book Personal Injury Small Claims, Portals and Fixed Costs and also a free copy of my book of Qualified One-Way Costs Shifting, Section 57 and Set-Off.

DAMAGES-BASED AGREEMENTS

Damages-Based Agreements are creatures of statute and the regulations are set out in the Damages-Based Agreements Regulations 2013.

My strong advice is never to use such agreements in relation to civil work, and this is for two main, connected reasons.

Firstly the maximum amount that can be charged in a Damages-Based Agreement in a personal injury matter is 25% including VAT and counsel’s fees and costs recovered from the other side.

Thus in a typical funding arrangement under a Conditional Fee Agreement a solicitor will get costs from the other side in accordance with the portal scheme or Fixed Recoverable Costs or open costs and will then charge the client an additional fee by way of solicitor and own client unrecovered costs and success fee and will generally cap that at 25% of damages.

Thus normally a solicitor will get 25% of damages plus recovered costs.

Under a Damages-Based Agreement the fee will be 25% including recovered costs.

Clearly where the fixed costs are over 25% of the damages, which they virtually always are once proceedings are issued, even in the fixed costs scheme, then the client pays nothing.

That is known as the Ontario Principle.

Indemnity principle applies

It gets worse.

If acting under a Damages-Based Agreement in a personal injury matter, which at present all FRC cases are, then the indemnity principle limits you to a total of 25% of damages, INCLUDING VAT and counsel’s fees, so you will get nowhere near even Fixed Recoverable Costs.

Example

Let us take an Employer’s Liability case where £15,005 is awarded at court.

Act on an hourly rate basis, getting paid win or lose, and the proposed fixed recoverable costs (FRC) are £12,517.80 including advocacy fees and VAT.

Maximum fee (25% of £15,005) £3,751.25
Less 
Counsel fixed advocacy fee including VAT               £1,980.00
 £1,771.25
Say counsel’s fee for conference, advice, etc. £1,500.00 + VAT  £1,800.00
Fee to solicitor for taking risk and winningMINUS  £     28.75

So you take all of the risk – and win.

Recovery is limited to £3,751.80, all of which – and more – is spent on counsel’s fees.

The defendant gets a windfall of £8,766.55 (FRC of £12,517.80 minus MAXIMUM DBA of £3,751.80).

Alternatively act by the hour and charge what you want.

Thus due to the indemnity principle, the solicitor acting for a successful claimant will only receive the contingency fee, even if recoverable costs would be higher. This point has been picked up by Master Haworth of the Senior Courts Costs Office. Speaking at the Lexis Nexis Costs and Litigation Funding Forum on 31 October 2012 he questioned what would happen in such a case, pointing out that the Legal Aid, Sentencing and Punishment of Offenders Act 2012 does not abrogate the indemnity principle and concluded that this meant that the solicitor would not be able to recover more than he would recover as a contingency fee.

Master Haworth gave as an example of a £12,000.00 personal injury case with recoverable costs of £6,000.00.

A solicitor operating under a Damages-Based Agreement would only be able to recover £3,000.00, providing the defendant’s insurer with a windfall of £3,000.00 and achieving no benefit for the claimant.

A solicitor in the same case with a conditional fee agreement and no success fee, thus totally protecting the claimant from any fees or deduction from damages would receive £6,000.00.

A solicitor with a conditional fee agreement with a success fee would receive up to £9,000.00, being recoverable fees plus a success fee capped at £3,000.00, being 25% of damages.

As Master Haworth so accurately put it:

“It makes DBAs meaningless in low-value claims.”

Nizami v Butt [2006] 1 WLR 3307

determined that the indemnity principle did not apply in relation to portal or Fixed Recoverable Costs cases as they represented a freestanding regime.

It is far from clear that that ruling applies to portal and Fixed Recoverable Costs cases which are funded by a Damages-Based Agreement. In any event if the matter becomes subject to open costs, for example because the claimant matches or beats its own Part 36 offer, or the matter is allocated to the multi-track and therefore fixed costs do not apply – see Qader & Others v Esure Ltd & Khan v McGee [2016] EWCA Civ 1109, 16 November 2016, or the matter is simply above the portal and Fixed Recoverable Costs limit, then the indemnity principle bites.

The potential benefits of a Damages-Based Agreement in securing a percentage-based fee without reference to time spent can be achieved by way of a pre-issue Contingency Fee Agreement under Section 57 of the Solicitors Act 1974, combined with a Bridging Agreement and Conditional Fee Agreement and that is the way I deal with matters here.

For those reasons I have not drafted a Damages-Based Agreement in relation to personal injury matters.

Contingency Fee Agreement for use pre-issue with Bridging Agreement and Conditional Fee Agreement – Underwoods model

Notes for Solicitors

THE PRE-ISSUE CONTINGENCY FEE AGREEMENT

Pre-issue work in all matters is classed as non-contentious business within the meaning of Section 57 of the Solicitors Act 1974.

  1. Contingency fee agreements have always been allowed in non-contentious work.  Pre-issue work is classed as non-contentious and therefore can be carried out under a contingency fee agreement.
  1. However once the case is issued then that pre-issue work retrospectively becomes contentious and thus the contingency fee agreement is of no effect.  The solution is to enter in to a conditional fee agreement and a contingency fee agreement from Day One.
  1. The agreement with the client will be that the contingency fee agreement operates until proceedings are issued at which point it drops away and the conditional fee agreement is deemed to have been in place from the beginning.  This is achieved by a bridging agreement.
  1. Absent contractual agreement with the other side there is no right to costs pre-issue and therefore it does not matter that the conditional fee agreement is not in place.  Costs are only payable by agreement; if they are agreed then there is no problem and if they are not agreed then proceedings will need to be issued at which point the conditional fee agreement comes in to force with effect from the beginning of the case.
  1. The potential problem is that fees on an hourly basis, even with a success fee, may be significantly less than the contingency fee would have been.  That will depend upon a combination of the settlement figure and the contingency fee percentage on the one hand and the time spent and the hourly rate on the other hand.
  1. Thus where there is a contingency fee agreement you should have a high hourly rate in the conditional fee agreement.
  1. Solicitor and own client rates can and should be very much higher than the rates that you are likely to recover on a between the parties basis, on the standard basis.
  1. This is for two reasons:

    (i) to maximize the alternative “take” to the contingency fee; and

    (ii) to maximize the indemnity costs received if, as a claimant, you match or beat your own Part 36 offer.

Such agreements cannot be used in employment tribunal work, where you must use a Damages-Based Agreement if working on a contingent basis, even in relation to pre-issue work.

Apart from employment cases, such agreements are specifically excluded from the provisions of The Damages-Based Agreements Regulations 2013 by Regulation 1(4) of those same Regulations:

“(4) Subject to paragraph (6), these Regulations shall not apply to any damages-based agreement to which section 57 of the Solicitors Act 1974 (non-contentious business agreements between solicitor and client) applies.”

The paragraph (6) exception reads:

“(6) Where these Regulations relate to an employment matter, they apply to all damages-based agreements signed on or after the date of which these Regulations come into force.”

As the Explanatory Note to The Damages-Based Agreements Regulations states:

“…section 58AA(9) of the [Courts and Legal Services] Act provides that, where section 57 of the Solicitors Act 1974 (c.47) applies to a DBA (other than one relating to an employment matter) it is not unenforceable only because it does not satisfy the conditions in section 58AA (4), under which these Regulations are made. Accordingly article 1(4) [sic – should read Regulation 1(4) – articles apply to Orders not Regulations] excludes those DBAs to which sections 57 of the Solicitors Act 1974 applies from the scope of these Regulations.”

Section 57 of the Solicitors Act 1974 has itself been amended by section 98 of the Courts and Legal Services Act 1990 and sections 117 and 221 of, and schedule 16 to, the Legal Services Act 2007, and now reads:

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 or 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, taxes, fees or other matters.

(3) The agreement shall be in writing and signed by the person to be bound by it or his agent in that behalf.

(4) Subject to subsections (5) and (7), the agreement may be sued and recovered on or set aside in the like manner and on the like grounds as an agreement not relating to the remuneration of a solicitor.

(5) If on any assessment of costs the agreement is relied on by the solicitor and objected to by the client as unfair or unreasonable, the costs officer may enquire into the facts and certify them to the court, and if from that certificate it appears just to the court that the agreement should be set aside, or the amount payable under it reduced, the court may so order and may give such consequential directions as it thinks fit.

(6) Subsection (7) applies where the agreement provides for the remuneration of the solicitor to be by reference to an hourly rate.

(7) If, on the assessment of any costs, the agreement is relied on by the solicitor and the client objects to the amount of the costs (but is not alleging that the agreement is unfair or unreasonable), the costs officer may enquire into—

(a) the number of hours worked by the solicitor; and

(b) whether the number of hours worked by him was excessive.”

It will be seen that section 57(2) specifically sanctions remuneration by way of a percentage.

There is no statutory cap on the percentage that may be charged to a client under a pre-issue contingency fee agreement but solicitors have a duty not to exploit clients and a duty to conduct themselves in a way that does not bring the profession into disrepute. Charging an unfairly high percentage risks putting a solicitor in breach of these duties.

In personal injury cases Parliament has fixed the maximum percentage to be taken by way of a success fee, or under a damages-based agreement, at 25%, including VAT, of a restricted pool which I have named the Allowed Damages Pool ( see – https://kerryunderwood.wordpress.com/2013/03/07/conditional-fee-agreements-damages-based-agreements-and-contingency-fees/).

In addition there is the issue of the now unrecoverable After-the-Event insurance premium. Pre-issue there is no risk of adverse costs; post issue there is. My advice is that in a pre-issue contingency fee agreement in relation to personal injury matters the percentage charged to the client, including VAT, should be 40%.

In employment matters Parliament has fixed the maximum at 35% including VAT and in potential employment Tribunal matters a damages-based agreement must be used.

In non-employment Tribunal employment matters I advise that the contingency fee be 40% including VAT.

Parliament has fixed the maximum percentage under all other damages-based agreements, that is all except personal injury and employment tribunal matters, at 50% including VAT.

There is no such restriction in relation to the success fee element of a conditional fee agreement outside the field of personal injury.

Thus I am satisfied that in non-employment and personal injury civil work under a pre-issue contingency fee agreement a figure of up to 50% including VAT is not unreasonable. Whether it is commercially viable in the marketplace is another matter. Traditionally my firm has worked on one-third.

I am satisfied that these figures are fair and reasonable and are certainly ones with which clients are happy.

The agreement must be in writing and must be signed by the client (section 57(3) Solicitors Act 1974).

We insert a default hourly rate of £480 including VAT as that is now our standard rate for most types of work, including work in preparation for multi-track cases. Solicitors can put in the figure that they think fit, but this must be discussed and agreed with the client. You can have different rates for different levels of lawyer and work, but one of the benefits of contingency fee agreements is their simplicity.

The protection and value to the client is that they pay nothing in the event of failure to obtain damages.

The client is guaranteed a fixed percentage of anything recovered.

This is in effect a contingency fee agreement and gives greater protection to clients than a conventional conditional fee agreement, as recognized in a an interesting, accurate and telling part of the High Court’s judgment in Bolt Burdon Solicitors v Tariq & Ors [2016] EWHC 811 (QB) (13 April 2016)

“156 Mr Mallalieu submitted strongly that the questions of fairness and reasonableness were not to be tested by the outcome, but by reference to the reasonable perception at the time the agreement was entered into. He submits that any analogy or comparison with a conditional fee agreement is wholly inappropriate. By way of illustration, assume a conditional fee agreement with an uplift of 100%. Solicitors incur costs of £200,000, which with the mark up of 100%, entitles them to £400,000. If the sum recovered in the proceedings is £1million, this may be a satisfactory outcome for the client. But if instead, after the same amount of work, the recovery in the proceedings is only £50,000, there would still be the same liability to pay costs of £400,000. This is because in a conditional fee agreement costs are always tied to the work done, whereas in a contingency fee agreement costs are always proportionate to recovery. Mr Mallalieu submits that to grant the relief sought in this case would be to destroy the commerciality of contingency fee agreements of this kind.

For example if the contingency fee is 40% then the fixed percentage of damages to the client is 60% and if it is a 30% contingency fee then it is 70% and so on.

Detailed guidance is given by the Court of Appeal in Rees v Gately Wareing [2014] EWCA Civ 1351.  Note that once proceedings are issued you must not use a contingency fee agreement, even if you are not on the record, or are merely assisting another solicitor.

Section 74 of the Solicitors Act 1974

Section 74(3) of the Solicitors Act 1974 provides:-

“(3)        The amount which may be allowed on the assessment of any costs or bill of costs in respect of any item relating to proceedings in a county court shall not, except in so far as rules of court may otherwise provide, exceed the amount which could have been allowed in respect of that item as between party and party in those proceedings, having regard to the nature of the proceedings and the amount of the claim and of any counterclaim.”

This is an important provision, which on its face prevents a solicitor charging any client any element of solicitor and own client costs in any County Court matter, including small claims, fixed costs matters as well as non-fixed costs matters in both the fast-track and multi-track in the County Court.

It allows a charge on defeat, but only to the extent that between the parties recovery would have been made in the event of a win.

However Section 74(3) has the escape clause “except in so far as rules of court may provide otherwise…”

They do.

CPR 46.9 reads:-

Basis of detailed assessment of solicitor and client costs

46.9

(1) This rule applies to every assessment of a solicitor’s bill to a client except a bill which is to be paid out of the Community Legal Service Fund under the Legal Aid Act 1988 or the Access to Justice Act 1999 or by the Lord Chancellor under Part 1 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012.

(2) Section 74(3) of the Solicitors Act 1974 applies unless the solicitor and client have entered into a written agreement which expressly permits payment to the solicitor of an amount of costs greater than that which the client could have recovered from another party to the proceedings.

(3) Subject to paragraph (2), costs are to be assessed on the indemnity basis but are to be presumed –

(a) to have been reasonably incurred if they were incurred with the express or implied approval of the client;

(b) to be reasonable in amount if their amount was expressly or impliedly approved by the client;

(c) to have been unreasonably incurred if –

(i) they are of an unusual nature or amount; and

(ii) the solicitor did not tell the client that as a result the costs might not be recovered from the other party.

(4) Where the court is considering a percentage increase on the application of the client, the court will have regard to all the relevant factors as they reasonably appeared to the solicitor or counsel when the conditional fee agreement was entered into or varied.”

Thus the Act, read in conjunction with this rule, does allow the solicitor to charge the client more than would have been recovered, but only if there is a written agreement expressly permitting payment of a greater sum.

CPR 46.9(4) refers to Conditional Fee Agreement success fees.

The appropriate wording should go in every retainer/Client Care Letter/agreement dealing with County Court or potential County Court litigation.

I suggest the following wording:-

“Section 74 Solicitors Act 1974 agreement

This agreement expressly permits the solicitors to charge an amount of costs greater than that which you will recover or could have recovered from the other party to the proceedings and expressly permits payment of such sum.

This part of this agreement is made under section 74(3) of the Solicitors Act 1974 and Civil Procedure Rules 46.9 (2) and (3).

In so far as any costs or disbursements are of an unusual nature or amount these costs might not be recovered from the other party.”

The portal system also raises the issue of when proceedings are issued; this is relevant in relation to whether the matter has become contentious, thus triggering section 74 and triggering the need to switch from a Contingency Fee Agreement to a Conditional Fee Agreement.

Proceeding to stage 3 involves paying a court fee and getting a hearing before a judge, so it seems to me that at that stage proceedings have been issued.

It is arguable that proceedings are issued once the matter is on the portal.

Adopting the Underwoods method avoids any problem; whenever proceedings have been issued, be that stage 1, stage 3 or Part 7, the Contingency Fee Agreement drops away and the Conditional Fee Agreement comes into place and the section 74 wording is in place.

Success fee

The success fee is now, generally not recoverable and thus represents costs which will not be recovered from the other party.

The rules require that the solicitor and client enter into a written agreement which expressly permits payment to the solicitor of an amount greater than that which the client could have recovered from another party to the proceedings.

In

Breyer Group Plc and Others v Prospect Law Limited, Unreported, Senior Courts Costs Office, 26 July 2017

the Senior Courts Costs Office said that a general warning was insufficient and that the solicitors must specifically point to this unusual aspect and give specific advice upon it – see paragraph 25 of the judgement.

This law only applies to County Court matters and therefore this wording does not have to be put in matters which do not come before the County Court, for example CICA claims.

There is a circular argument as to whether this clause needs to be in a Contingency Fee Agreement covering pre-issue of proceedings. By definition the Contingency Fee Agreement covers pre-issue work and if proceedings are issued then the Conditional Fee Agreement is in place from day one.

However if the matter is settled pre-issue and costs are sought from the other side, with an additional charge to be made to the client as is usual, then it is arguable that on assessment the client could rely upon Section 74(3) in the absence of this clause being included.

The counter-argument is that it is not contentious business and Section 74(1) specifically applies only to contentious business.

It is simply not worth taking the risk. Include the wording.

THE BRIDGING AGREEMENT

This is a standard agreement for any type of civil litigation, but must not be used in any employment case as the Courts and Legal Services Act 1990 requires the use of a Damages-Based Agreement in employment cases conducted on a contingency fee basis.

The bridging agreement contains consideration of one penny as a contract without consideration has to be a deed under seal to be enforceable.

It is arguable that the consideration is the agreement to enter in to both agreements, but there is no point in taking the risk.

THE CONDITIONAL FEE AGREEMENT

This is the usual Conditional Fee Agreement that you utilize for the type of work covered by the Contingency Fee Agreement. I have set out elsewhere an extensive list of the different types of Conditional Fee Agreement, all of which are available from me – at a price J

Written by kerryunderwood

January 21, 2022 at 10:07 am

Posted in Uncategorized

THE UNDERWOODS METHOD – GETTING THE RETAINER RIGHT: 4

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This is the fourth article in a series of posts dealing with Getting the Retainer Right.

This piece first appeared in Issue 36 of Kerry On Costs… And So Much More…, a weekly  publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.

By subscribing to the Newsletter, you are entitled to a free copy of my 1300-page, three volume book Personal Injury Small Claims, Portals and Fixed Costs and also a free copy of my book of Qualified One-Way Costs Shifting, Section 57 and Set-Off.

This method effectively creates a lawful contingency fee agreement which gives greater protection to clients than a conventional conditional fee agreement, as recognized in a an interesting, accurate and telling part of the High Court’s judgment in Bolt Burdon Solicitors v Tariq & Ors [2016] EWHC 811 (QB) (13 April 2016)

“156 Mr Mallalieu submitted strongly that the questions of fairness and reasonableness were not to be tested by the outcome, but by reference to the reasonable perception at the time the agreement was entered into. He submits that any analogy or comparison with a conditional fee agreement is wholly inappropriate. By way of illustration, assume a conditional fee agreement with an uplift of 100%. Solicitors incur costs of £200,000, which with the mark up of 100%, entitles them to £400,000. If the sum recovered in the proceedings is £1million, this may be a satisfactory outcome for the client. But if instead, after the same amount of work, the recovery in the proceedings is only £50,000, there would still be the same liability to pay costs of £400,000. This is because in a conditional fee agreement costs are always tied to the work done, whereas in a contingency fee agreement costs are always proportionate to recovery. Mr Mallalieu submits that to grant the relief sought in this case would be to destroy the commerciality of contingency fee agreements of this kind.”

Contrary to popular belief there is no maximum charge to one’s own client in personal injury work ,other than the solicitor and client reasonableness which applies to all retainers under CPR 46.9 which I deal with below, provided that the correct method of funding and the correct documents are used.

Solicitors have a duty not to exploit clients and not to bring the profession into disrepute or act in a way that undermines public trust and confidence in the profession.

Here I explain how to structure charges and agreements so that you are in a similar position if you win a civil claim on a no win no fee basis as compared with acting on an old fashioned hourly rate, win or lose, while still protecting the client.

Clearly if you do not win you are in a far worse position than charging by the hour, win or lose, as in a no win no fee arrangement the lawyer receives nothing in the event of defeat.

Having made the huge concession to the client of not charging in the event of defeat, it is nonsensical for a lawyer to be worse off, if they win, than under an old fashioned win or lose hourly rate.

That turns the notion of a success fee on its head.

The answer is to have a sufficiently full hourly rate so that there is a gap between solicitor and own client costs and recoverable costs, just as there is in all other civil work charged by the hour.

That unrecovered gap is not subject to any restriction, save the overriding professional obligations set out above.

Further protection, as well as an attractive marketing position, can be achieved by promising to cap as a percentage of damages the amount actually payable by the client over and above costs recovered from the other side.

Here I set out a scheme that works for all civil cases.

This will be of much greater relevance when fixed recoverable costs are extended to virtually all civil claims worth £100,000 or less, in October 2022.

It is important to note that under the indemnity principle all costs must be contractually payable by the client, some of which are then recovered from the other side in a cost bearing matter.

The indemnity principle does not apply in relation to portal costs and Fixed Recoverable Costs (Butt v Nizami [2006] EWHC 159 (QB)) but here I set out a scheme that works for all cases.

Section 74 of the Solicitors Act 1974

Section 74(3) of the Solicitors Act 1974 provides:-

“(3)        The amount which may be allowed on the assessment of any costs or bill of costs in respect of any item relating to proceedings in a county court shall not, except in so far as rules of court may otherwise provide, exceed the amount which could have been allowed in respect of that item as between party and party in those proceedings, having regard to the nature of the proceedings and the amount of the claim and of any counterclaim.”

This is an important provision, which on its face prevents a solicitor charging any client any element of solicitor and own client costs in any County Court matter, including small claims, fixed costs matters as well as non-fixed costs matters in both the fast-track and multi-track in the County Court.

It allows a charge on defeat, but only to the extent that between the parties recovery would have been made in the event of a win.

However Section 74(3) has the escape clause “except in so far as rules of court may provide otherwise…”

They do.

CPR 46.9 reads:-

Basis of detailed assessment of solicitor and client costs

46.9

(1) This rule applies to every assessment of a solicitor’s bill to a client except a bill which is to be paid out of the Community Legal Service Fund under the Legal Aid Act 1988 or the Access to Justice Act 1999 or by the Lord Chancellor under Part 1 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012.

(2) Section 74(3) of the Solicitors Act 1974 applies unless the solicitor and client have entered into a written agreement which expressly permits payment to the solicitor of an amount of costs greater than that which the client could have recovered from another party to the proceedings.

(3) Subject to paragraph (2), costs are to be assessed on the indemnity basis but are to be presumed –

(a) to have been reasonably incurred if they were incurred with the express or implied approval of the client;

(b) to be reasonable in amount if their amount was expressly or impliedly approved by the client;

(c) to have been unreasonably incurred if –

(i) they are of an unusual nature or amount; and

(ii) the solicitor did not tell the client that as a result the costs might not be recovered from the other party.

(4) Where the court is considering a percentage increase on the application of the client, the court will have regard to all the relevant factors as they reasonably appeared to the solicitor or counsel when the conditional fee agreement was entered into or varied.”

Thus the Act, read in conjunction with this rule, allows the solicitor to charge the client more than would have been recovered, provided there is a written agreement expressly permitting payment of a greater sum.

CPR 46.9(4) refers to Conditional Fee Agreement success fees.

The appropriate wording should go in every retainer/Client Care Letter/agreement dealing with County Court or potential County Court litigation.

I suggest the following wording:-

“Section 74 Solicitors Act 1974 agreement

This agreement expressly permits the solicitors to charge an amount of costs greater than that which you will recover or could have recovered from the other party to the proceedings and expressly permits payment of such sum.

This part of this agreement is made under section 74(3) of the Solicitors Act 1974 and Civil Procedure Rules 46.9 (2) and (3).

In so far as any costs or disbursements are of an unusual nature or amount these costs might not be recovered from the other party.”

This law only applies to County Court matters and therefore this wording does not have to be put in matters which do not come before the County Court, for example High Court claims.

There is a circular argument as to whether this clause needs to be in a Contingency Fee Agreement covering pre-issue of proceedings. By definition the Contingency Fee Agreement covers pre-issue work and if proceedings are issued then the Conditional Fee Agreement is in place from day one.

However if the matter is settled pre-issue and costs are sought from the other side, with an additional charge to be made to the client as is usual, then it is arguable that on assessment the client could rely upon Section 74(3) in the absence of this clause being in the Contingency Fee Agreement.

The counter-argument is that it is not contentious business and Section 74(1) specifically applies only to contentious business.

It is simply not worth taking the risk. Include the wording.

I advise never having a Damages-Based Agreement in any case, expect in Employment Tribunal, or potential Employment Tribunal cases, where they are compulsory if acting on a contingent basis.

The Agreements

Have a Section 57 Solicitors Act 1974 Contingency Fee Agreement together with a Conditional Fee Agreement in place from day one, with the Conditional Fee Agreement coming into place if the matter becomes issued and with the Contingency Fee Agreement then falling away.

This is achieved by a Bridging Agreement.

The principle of having an agreement that will only come into place if the other agreement is for any reason not valid was approved in Forde v Birmingham City Council [2009] 1 WLR 2732 and  confirmed in Budana v Leeds Teaching Hospital NHS Trust – 4 February 2016.

Forde v Birmingham is also authority for having more than one agreement in place simultaneously.

The reason for having more than one agreement is that a Contingency Fee Agreement under the Solicitors Act 1974 can be used for pre-issue work, but not for post-issue work, whether or not the case is cost bearing, that is irrespective of which track it is allocated to.

Once a matter is issued the pre-issue work retrospectively becomes contentious and thus the Contingency Fee Agreement cannot be relied upon as such an agreement can only be used for non-contentious work.

It would be possible to have everything in one document, but defence lawyers are very unfamiliar with Contingency Fee Agreements, and so are most judges.

By definition if you have reached the stage of assessment, proceedings have been issued and it will be the Conditional Fee Agreement, with which everyone is now familiar, which will govern costs.

I think it best not to have a hybrid agreement containing the Contingency Fee Agreement as that is likely to sound alarm bells to the paying party and the judge.

If a matter is settled pre-issue, then that is a matter of contract and the funding arrangement is irrelevant.

Case Law

The Underwoods Method was criticised by District Judge Lumb, now retired, in

A & M (by their litigation friend) v Royal Mail Group (2) [2015] MISC B30 (CC).

His remarks were obiter and had nothing at all to do with the issue he was trying, which was a totally separate matter of deductions from a child’s damages.

In

Broadhurst v Tan and Taylor v Smith [2016] EWCA Civ 94 (23 February 2016)

the Court of Appeal, in a central part of its Judgment, recognised, neither with approval nor criticism, the existence of this method, that is of a solicitor and own client hourly rate with the overall charge to the client being capped at a percentage of damages. It amounts to a wholesale rejection of District Judge Lumb’s remarks.

This method is known as the Underwoods Method and the Master of the Rolls said at paragraph 32:-

“He says that the way in which lawyers are typically engaged in this part of the market is heavily reliant on CFAs and legal expenses insurance. Both forms of funding typically provide for lawyers to charge on a conventional hourly basis, but may cap their right to enforce payment with reference to the amount recovered. He adds that it is still very common for costs beyond fixed costs to be deducted from claimants’ damages. There is no evidence before us to support this statement either, although I have no reason to doubt it.”

Written by kerryunderwood

January 20, 2022 at 10:05 am

Posted in Uncategorized

CHECKLIST OF MATTERS TO CONSIDER WITH A CLIENT – GETTING THE RETAINER RIGHT: 3

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This is the third article in a series of posts dealing with Getting the Retainer Right.

This piece first appeared in Issue 36 of Kerry On Costs… And So Much More…, a weekly  publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.

By subscribing to the Newsletter, you are entitled to a free copy of my 1300-page, three volume book Personal Injury Small Claims, Portals and Fixed Costs and also a free copy of my book of Qualified One-Way Costs Shifting, Section 57 and Set-Off.

  • Does the client have Before-the-Event insurance?
  • Topping up Before-the-Event insurance by way of a No-Win, Lower Fee Agreement
  • Lower fee to be the amount paid by the Before-the-Event insurer
  • After-the-Event insurance
  • Who is paying for the ATE insurance?
  • ATE insurance included in capped percentage of damages?
  • Use of counsel
  • Counsel’s fees
  • Will counsel be on a Conditional Fee Agreement?
  • Disbursements – who is paying and when?
  • Interest charged to client on disbursement/costs funding
  • Recovering interest from the other side
  • Third party funding
  • Types of third party funding
  • Who is the agreement between?
  • Who gets what and in what order?
  • Will all charges to the client be capped by reference to damages?

Written by kerryunderwood

January 19, 2022 at 12:31 pm

Posted in Uncategorized

IMPRISONED FOR CONTEMPT: CAN I HAVE MY COSTS PLEASE?

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This piece appears in Kerry On Costs… And So Much More…, a fortnightly publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.

By subscribing to the Newsletter, you are entitled to a free copy of my 1300-page, three volume book Personal Injury Small Claims, Portals and Fixed Costs and also a free copy of my book of Qualified One-Way Costs Shifting, Section 57 and Set-Off.

In

Kea Investments Ltd v Watson [2022] EWHC 5 (Ch) (11 January 2022)

the respondent was committed to prison for four months for contempt of court, but sought costs on the basis that the applicant had failed to prove all of the allegations.

The High Court ordered the respondent to pay 50% of the applicant’s costs on the indemnity basis.

In spite of these apparently bizarre facts, in law this was a ruling concerning the correct application of CPR 44.2 (2), by which the staring point is that the unsuccessful party will pay the costs of the successful party, with the court having the power to make a different order – CPR 44.2 (b).

Unsurprisingly, the court held that the applicant was the successful party as he had succeeded in having the respondent sent to prison.

Surprisingly, the applicant conceded that, as he had not succeeded on all of the issues, a different order should indeed be made.

The court ordered the respondent to pay 50% of the applicant’s costs and, as is usual in contempt cases, awarded those costs on the indemnity basis.

Written by kerryunderwood

January 18, 2022 at 3:12 pm

Posted in Uncategorized

WHAT CAN YOU AGREE WITH YOUR CLIENT? – GETTING THE RETAINER RIGHT: 2

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This is the second article in a series of posts dealing with Getting the Retainer Right.

This piece first appeared in Issue 36 of Kerry On Costs… And So Much More…, a weekly  publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.

By subscribing to the Newsletter, you are entitled to a free copy of my 1300-page, three volume book Personal Injury Small Claims, Portals and Fixed Costs and also a free copy of my book of Qualified One-Way Costs Shifting, Section 57 and Set-Off.

  • Hourly rate – uncapped
  • Hourly rate – total capped
  • Hourly rate but total capped by reference to percentage of damages
  • No-win, No-fee with success fee not capped by reference to damages
  • No-win, No-fee – success fee capped by reference to damages
  • No-win, No-fee – no success fee
  • CFA-Lite – costs limited to those recovered
  • No-win, Lower fee with all of the above
  • Fixed Fee
  • Fixed initial fee – then hourly rate with all above combinations 
  • Fixed initial fee – then conditional fee with all above combinations
  • No-win, Lower fee with all of the above combinations
  • Credit for fixed initial fee in the event of a win?
  • Who is paying disbursements?
  • Interest
  • Higher hourly rate to reflect solicitor funding case
  • Part 36 – Who is taking the risk?
  • Retainer
  • Right to interim bill
  • Recovered costs plus a percentage of damages
  • Advance fee plus any contingent or conditional agreement.

Written by kerryunderwood

January 18, 2022 at 10:05 am

Posted in Uncategorized

YOU CAN’T JUST TAKE 25%! OR 35% OR 50% – GETTING THE RETAINER RIGHT: 1

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Happy New Year!

This is the first of a series of posts dealing with Getting the Retainer Right.

This piece first appeared in Issue 36 of Kerry On Costs… And So Much More…, a weekly  publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.

By subscribing to the Newsletter, you are entitled to a free copy of my 1300-page, three volume book Personal Injury Small Claims, Portals and Fixed Costs and also a free copy of my book of Qualified One-Way Costs Shifting, Section 57 and Set-Off.

Although, generally, clients are happy to pay a capped percentage of damages in return for having no risk, by way of a No Win No Fee Conditional Fee Agreement, the establishment’s traditional hostility to Contingency Fee Agreements, and the freedom and power that they give to individuals against big corporations, means that you cannot simply charge what is in reality a Contingency Fee, unless the matter is settled pre-issue.

Pre-issue, there is no problem as Contingency Fee Agreements have been lawful in non-contentious business at least since the Solicitors and Attorneys Act 1729.

The relevant provisions are now in Section 57 of the Solicitors Act 1974.

Thus, if the matter is settled pre-issue, then you can indeed simply charge the client a straight 25%, 35%, or whatever irrespective of risk, and irrespective of the work done.

The problem is that at the outset, you will never know whether or not the case will settle pre-issue, and once the case is issued then it becomes contentious, and the work done pre-issue retrospectively becomes contentious, and thus cannot be covered by a Contingency Fee Agreement.

Theoretically, a Damages-Based Agreement does allow a fixed percentage charge to be made whether the matter is settled pre-issue or post-issue, but that acts as an absolute cap on damages payable by the other party, due to the indemnity principle.

The percentage includes VAT, and a quick glance at the table of fixed recoverable costs will show that a Damages-Based Agreement in personal injury work means that you cannot even recover fixed recoverable costs from the paying party.

Fixed recoverable costs are to be extended to virtually all civil claims valued at £100,000 or less, in October 2022, and the same principles will apply.

Although Butt v Nizami disapplies the indemnity principle in fixed costs cases, a Damages-Based Agreement still limits recoverability to 25% of damages as that is the law contained in the Damages-Based Agreements Regulations, passed by Parliament, which obviously override any court decision.

Furthermore, in Damages-Based Agreements, credit must be given to the client for costs recovered from the other side and thus generally you would be charging the client nothing at all, which defeats the purpose of seeking to charge the client a sum equal to a percentage of damages in return for taking all of the risks.

Thus Damages-Based Agreements should never be used in civil work, although they are compulsory if working on a contingency basis in Employment Tribunal or potential Employment Tribunal work.

Conditional Fee Agreements, effectively a form of Contingency Fee Agreement but with additional restrictions, are allowed in contentious work.

Thus the preferred method is to have a Contingency Fee Agreement and a Conditional Fee Agreement entered into by the client at the outset of the case, with a Bridging Agreement providing that the Conditional Fee Agreement only comes into play if the matter is issued, but then is effective from the beginning of the case.

This allows a straight percentage to be charged if the matter is settled pre-issue, but if the matter is settled post-issue, then all of the rules and regulations applying to Conditional Fee Agreements apply.

The success fee in personal injury Conditional Fee Agreements is capped at the lower of 100% of base costs or 25% of the Allowed Damages Pool, that is general damages and past special damages, net of Compensation Recovery Unit payments.

However, it is a cap and not an entitlement.

A full hourly rate charged to the client will inevitably mean a shortfall between recovered costs and solicitor and own client costs, and that shortfall can be charged to the client, just as it would be in a non-Conditional Fee case, and does not form part of the success fee.

It is only the success fee which is limited to 25% of damages.

It will be seen that, in appropriate cases and depending upon the amount of work done etc., the client can be charged a percentage higher than 25%.

Thus the key is to get the hourly rate right, and that too is under attack by those challenging solicitors’ bills, and to get the documentation in order.

Generally, in personal injury cases, the combination of unrecovered solicitor and own client costs, together with the success fee, will exceed 25% of damages, thus allowing that capped sum to be charged.

As reliance on the Conditional Fee Agreement only occurs if the matter has been issued, and generally then more work will have been done than on a case settled pre-issue, reaching the 25% charge to the client will rarely be a problem.

The key is the ability to justify the percentage success fee and the hourly rate on any given issued case.

Non-Personal Injury Matters

Exactly the same principles apply, save that in general civil litigation the success fee is not limited to 25% of damages.

The success fee in all in all civil litigation remains capped at 100% of base costs.

In relation to non-personal injury work, there is a Damages-Based Agreement cap of 50% of damages, but I advise against using Damages-Based Agreements, except in Employment Tribunal, or potential Employment Tribunal cases, where they are compulsory if you are acting on a contingent basis.

The maximum in Employment Tribunal or potential Employment Tribunal cases is 35% under a Damages-Based Agreement.

The Percentage

I have referred above to 25%, and that is the maximum percentage of damages that may be charged by way of a success fee in a personal injury matter under a Conditional Fee Agreement, or in total in a personal injury matter under a Damages-Based Agreement.

There is no maximum prescribed under a Section 57 Solicitors Act 1974 Contingency Fee Agreement in any type of work and in

Bolt Burdon Solicitors v Tariq & Others [2016] EWHC 811 (QB)

the High Court approved a contingency fee of 50%.

Please note that Contingency Fee Agreements under Section 57 of the Solicitors Act 1974 cannot be used in Employment Tribunal proceedings, or potential Employment Tribunal proceedings, where a Damages-Based Agreement must be used if the matter is being dealt with on a contingent fee basis, and where the maximum charge is 35% of damages.

With Conditional Fee Agreements the courts have strongly encouraged the use of a cap for all charges made to the client, and indeed in

Belsner v Cam Legal Services Ltd [2020] EWHC 2755 (QB)

the High Court held a retainer that did not cap all charges, but merely the success fee, as unfair in a Solicitors Act 1974 solicitor and own client assessment, and disallowed the costs. The appeal against this decision is expected to be heard by the Court of Appeal in February 2022.

In connection with the key issue of informed consent, and fairness under the Solicitors Act 1974 goes to informed consent, the court in

Swann v Slater and Gordon (UK) Limited 25 January 2021, Queen’s Bench Division Birmingham

referred to the “magnetic attraction” of a percentage cap on all charges payable by the client.

However, even in personal injury cases, that cap does not need to be limited to 25%, and indeed there is no limit at all, save that in personal injury cases the success fee element of charge may never exceed 25% of the allowed damages.

My view is that an overall capped charge of 40%, including VAT, will be held by the court to be fair, provided that the client is genuinely given informed consent.

Written by kerryunderwood

January 17, 2022 at 12:57 pm

Posted in Uncategorized

SOLICITOR’S BILLS: STATUTORY AND COMMON LAW ASSESSMENT CONSIDERED IN DETAIL

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This piece appears in Issue 31 of Kerry On Costs… And So Much More…, a fortnightly publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.

By subscribing to the Newsletter, you are entitled to a free copy of my 1300-page, three volume book Personal Injury Small Claims, Portals and Fixed Costs and also a free copy of my book of Qualified One-Way Costs Shifting, Section 57 and Set-Off.

In

Blacklion Law LLP v Amira Nature Foods Ltd & Anor [2021] EWHC B22 (Costs) (11 November 2021)

the Senior Courts Costs Office examined in detail the issue of solicitor and own client bills under the Solicitors Act 1974, including statute bills, Chamberlain bills, interim statute bills and non-statute interim invoices.

Here the claimant solicitors took proceedings against the defendants in relation to unpaid invoices relating to two retainers.

One was a general retainer covering a variety of matters and the other concerned services relating to a proposed bond issue which never took place; the proceedings here related only to the general retainer.

The claimant delivered 10 invoices and the defendants paid various sums, and there were some credit notes, leaving a balance of £118,510.81.

The defence relied upon the proposition that an alleged lack of particularity in relation to the services rendered failed to establish that the claimant solicitors had the right to render the invoices and the defendant had an obligation to pay them.

The defence did not deny or put the claimant to proof that the claimant’s general retainer invoices were valid statute bills.

Had it done so, it may have furnished a defence to the claim, forcing the claimant to deliver a final, valid bill.

The claimant obtained summary judgment from a Deputy Master with the amount of the costs to be assessed, together with orders as to the pleadings in the detailed assessment.

The defendant then sought a bill of costs of the client normally prepared for statutory detailed assessments under the Solicitors Act 1974, but the claimant said that the assessment ordered was a common law assessment and not a statutory assessment, and that the defendant was out of time to apply for a statutory assessment and that the court had no power to require the claimant to disclose the files.

The court here said that even if no statute bills had ever been rendered by the claimant under that general retainer, it was not appropriate to make an order now, as that would unpick the agreed arrangements embodied in the Deputy Master’s order, solely because the defendant, years into the litigation, wished radically to revise its position.

It also said that it had no power to order delivery of a statute bill in a particular format; only a solicitor can determine the content and terms of that solicitor’s claim for payment and neither the client, nor the court, can make that determination on a solicitor’s behalf.

The court held that on a non-statutory assessment it had power to order a breakdown of the solicitor’s bill and that its case management powers under the Civil Procedure Rules were not bound by 19th Century authority.

The court could make any order it saw fit in order to achieve the overriding objective and that included the delivery of a breakdown, if a breakdown is needed for the efficient and fair assessment of the solicitor’s bill. The breakdown is a tool to assist the assessment of a non-statutorily bill, and not a replacement of it.

“77.       That is why, for example, where the solicitor has delivered a discounted bill and the client has applied under section 70 of the 1974 act for detailed assessment, the solicitor is entitled to produce a breakdown showing the full, undiscounted value of the work done and disbursements incurred. The client will then have to shoulder the burden of showing, by reference to the full breakdown, that the solicitor’s reasonable fees and disbursements are less than the amount of the bill actually delivered. If the breakdown is reduced by one fifth or more, but the bill is not, then the “one-fifth rule” embodied in section 70(9) of the 1974 Act will operate in the solicitor’s favour, not the client’s.”

The court held that the parties had by their conduct accepted that the bills were all statute bills and that was that.

The court doubted that it had an inherent jurisdiction to order a non-statutory assessment on an invoice that is not a final statute bill, as such invoice would have no legal force.

“93.       Even if this were a case, as the Defendants argue, in which the Claimant has never delivered a statute bill it is not a case in which it would be appropriate to exercise the court’s discretion to order that such a bill now be delivered. To do so would be to support a collateral attack upon the order made by Deputy Master Nurse on 15 February 2021, which sets out an agreed arrangement by which the earlier invoices rendered by the Claimant are to be treated as paid and settled, and the unpaid remainder are to be subjected to the scrutiny of the court. Nor do I have the power to order that the Claimant deliver a statute bill in any particular form.

94.         Both parties have, from the outset of this litigation to the judgment obtained by the Claimant on 15 February 2021, conducted these proceedings on the basis that all of the invoices rendered by the Claimant under the General Retainer had the status, whether individually or collectively, of a statute bill or bills. The judgment obtained by the Claimant, which sets out the terms of this assessment, is inconsistent with any other conclusion. It is too late for the Defendants now to attempt to argue a different case before me.

95.         If the General Retainer invoices are individual statute bills rather than a Chamberlain series, this court does not have the power to order the statutory assessment of those paid more than 12 months ago. If they do form a Chamberlain series, no order for statutory assessment could be made except under special circumstances, and no such circumstances have been shown.

96.         I am not persuaded that it is appropriate for me to restart the process of assessing invoices 304, 312, 314, 322 and 1179 by making an order either for the inspection of the Claimant’s files or for the Claimant to deliver a breakdown, but subject to submissions I do propose to review the information provided in support of the Claimant’s bills and the objections taken to them, to determine whether further directions may be needed.”

Written by kerryunderwood

December 7, 2021 at 9:43 am

Posted in Uncategorized

COMPENSATION RECOVERY UNIT PAYMENTS AND UNIVERSAL CREDIT

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I am grateful to Tracy Williams of Roper James Solicitors for raising this matter with me, and for her assistance.

Before the introduction of Universal Credit, when settling a personal injury claim, a Compensation Recovery unit (CRU) certificate was obtained setting out the State Benefits which the Claimant had received, between which dates and the amount.

The certificate broke down monies paid for each individual benefit such as Income Support, Housing Benefit and so on.

Out of the total paid, the only benefits required to be recouped are those that are like for like; if damages were received in respect of a loss of earnings claim, then any payments made in respect of income support during the material time would be recouped.

If benefits were received for other matters, where no corresponding head of claim had been advanced, then there would be no like for like head of claim against which to offset those recoverable benefits and so no liability to repay these, as they had no bearing on the amount of damages recovered and the idea was to prevent the Claimant having double recovery

Since the introduction of Universal Credit, the individual benefits are not broken down, other than additionally setting out receipts for Personal Independence Payments – Living and Mobility.

 Accordingly, it is impossible to do a like for like recoupment and damages may be recouped to repay child benefit or housing benefit which were never claimed in the personal injury action, which was never the intention of the rule against double recovery.

A solicitor has sent me details of a case, and has given me permission to use the redacted documents.

In this particular case, the loss of earnings advanced is in the region of £60,000 but as you will note from the attached anonymised CRU certificate the amount that will be recouped in respect to Universal Credit will be £80,404.79 (we have no issue with PIPL and PIPM recoupment) which means the Claimant will lose in the region of £20,000 from his damages.

This anomaly, will surely make it difficult for any Trial Judge to award damages and likewise it is making it nigh on impossible to enter into settlement negotiations as the Defendant has to rely on the total of the certificate

We have requested revised CRU certificates showing a breakdown of the Universal Credit element when this has been raised by the Claimant but to date the DWP have not provided a revised CRU certificate or indeed any response at all.

CRU Certificate

To muddy the waters further, Universal Credit payments can change from month to month depending on the claimant’s income at the time.

I would welcome any comments or information from other lawyers who have encountered the same problem.

Written by kerryunderwood

December 6, 2021 at 2:00 pm

Posted in Uncategorized

SIGNATURE REQUIREMENTS RE CFAS DBAS AND CONTINGENCY FEE AGREEMENTS

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This piece first appeared in the Practical Law Dispute Resolution Blog.

Kerry On Costs… And So Much More… is a fortnightly publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.

By subscribing to the Newsletter, you are entitled to a free copy of my 1300-page, three volume book Personal Injury Small Claims, Portals and Fixed Costs and also a free copy of my book of Qualified One-Way Costs Shifting, Section 57 and Set-Off.

Summary

Conditional Fee Agreements – no signature required.

Damages-Based Agreements – no signature generally required, with one exception.

Contingency Fee Agreements – physical signature required in all cases; electronic signature not valid.

Conditional Fee Agreements

There is no statutory or secondary legislation that requires Conditional Fee Agreements to be signed and consequently the law relating to electronic signatures is of no relevance as there is no requirement for any signature in the first place.

Section 58 of the Courts and Legal Services Act 1990, as amended, which governs Conditional Fee Agreements, provides at Section 58(3):

“(3)        The following conditions are applicable to every conditional fee agreement #

(a) it must be in writing;

(b) it must not relate to proceedings which cannot be the subject of an enforceable conditional fee agreement; and

(c) it must comply with such requirements (if any) as may be prescribed by the Lord Chancellor.”

This is part of a lengthy and detailed Act where Parliament has gone to great lengths to set out what is required, permitted and prohibited in respect of Conditional Fee Agreements and has done so by primary legislation. It pointedly does not require the agreement to be signed.

This is reinforced by the fact that, in relation to Non-Contentious Business Agreements, the term used to refer to Contingency Fee Agreements in section 57 of the Solicitors Act 1974, Parliament has required that Contingency Fee Agreements be signed.  It is clear that Parliament has differentiated between Conditional and Contingency Fee Agreements, and I am satisfied that a Conditional Fee Agreement does not need to be signed in order to be valid and enforceable.

The Conditional Fee Agreements Order 2013 does not require a Conditional Fee Agreement to be signed.

Nevertheless, from an evidential point of view, that is to prove that the client did indeed enter in to, and agree to, the Conditional Fee Agreement, my clear advice is that it should always be physically signed by both parties, and this will be relevant to the key issue of informed consent.

Damages-Based Agreement

Damages-Based Agreements are creatures of statute, specifically Section 45 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, which amends Section 58AA of the Courts and Legal Services Act 1990.

Section 58AA(4)(a) states that the agreement “must be in writing”; there is no requirement for a signature in what is a lengthy section running to 10 subsections.

Again this is in marked contrast to Section 57(3) of the Solicitors Act 1974 which requires that a Non-Contentious Business Agreement, which includes Contingency Fee Agreements, “shall be in writing and signed…”

Thus, I am satisfied that there is no requirement for a Damages-Based Agreement to be signed.

The secondary legislation governing Damages-Based Agreements is The Damages-Based Agreements Regulations 2013.

Regulation 3 deals with “Requirements of an agreement in respect of all damages-based agreements” and there is no requirement that a Damages-Based Agreement be signed.

Regulation 5 imposes significant extra regulatory requirements in relation to employment Damages-Based Agreements, but again there is no requirement for signature.

Regulation 6 does require a signature in one, limited, circumstance:

“6.          In an employment matter, any amendment to a damages-based agreement to cover additional causes of action must be in writing and signed by the client and the representative”.

Thus, Parliament has specifically required signature, by both parties, in this one instance.

It follows that signature is NOT required in any other circumstance in a Damages-Based Agreement. The Explanatory Notes, not part of the Regulations, reinforces this:

“These Regulations apply to all DBAs, including those which relate to employment matters, entered into or signed  on or after the date on which they come into force”.

Thus, the Explanatory Notes, by the use of the word “or” envisage an unsigned DBA.  The Notes also say “Regulation 6 specifies that additional causes of action can be added to the agreement by written and signed amendment”, again making the point that these requirements apply only in that circumstance.

As there is no requirement for a Damages-Based Agreement to be signed at all, the issue of the validity of an electronic signature does not apply.

Nevertheless, from an evidential point of view, that is to prove that the client did indeed enter into, and agree to, the Damages-Based Agreement, my clear advice is that it should always be physically signed by both parties.

Contingency Fee Agreements

Contingency Fee Agreements covering non-contentious work are specifically excluded from the provisions of The Damages-Based Agreements Regulations 2013 by Regulation 1(4) of those Regulations:

“(4)        Subject to paragraph (6), these Regulations shall not apply to any damages-based agreement to which Section 57 of the Solicitors Act 1974 (non-contentious business agreements between solicitor and client) applies”.

Section 57(3) of the Solicitors Act 1974 provides:

“(3)        The agreement shall be in writing and signed by the person to be bound by it or his agent in that behalf”.

That is a clumsily worded provision as clearly in any contract both parties are to be bound, otherwise it is not a contract.

In the context of the Solicitors Act 1974 generally, this is a requirement that the client sign the Non-Contentious Business Agreement, but I advise that both parties, that is client and solicitor, sign the contract.

Thus a Contingency Fee Agreement does need to be signed.

The question then arises as to whether an electronic signature suffices. Electronic signatures are governed by the Electronic Communications Act 2000.

Section 7 of the 2000 Act states:

“7.          Electronic signatures and related certificates.

(1) In any legal proceedings—

(a) an electronic signature incorporated into or logically associated with a particular electronic communication or particular electronic data, and

(b) the certification by any person of such a signature, shall each be admissible in evidence in relation to any question as to the authenticity of the communication or data or as to the integrity of the communication or data.

(2) 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.

(3) For the purposes of this section an electronic signature incorporated into or associated with a particular electronic communication or particular electronic data is certified by any person if that person (whether before or after the making of the communication) has made a statement confirming that—

(a) the signature,

(b) a means of producing, communicating or verifying the signature, or

(c) a procedure applied to the signature, is (either alone or in combination with other factors) a valid means of signing.”

This makes all electronic signatures admissible in legal proceedings, but that does not of itself overturn any statutory requirement for a traditional signature; that is dealt with by Section 8.

Section 8 allows for modification of any enactment or subordinate legislation by way of statutory instrument to allow for an electronic signature where the original legislation requires a conventional signature (Section 8(2)(c)).

No such statutory instrument has been laid in relation to Section 57(3) Solicitors Act 1974 and thus an electronic signature is not valid on a Contingency Fee Agreement and any such agreement lacking the client’s physical signature is void.

However, my view is that if a client prints off an electronically communicated contingency fee agreement and signs the printed copy and scans in that printed copy and emails it to the solicitor, then there is compliance with Section 57(3) and the contingency fee agreement is valid.

Written by kerryunderwood

December 3, 2021 at 11:47 am

Posted in Uncategorized

SOLICITOR’S BILLS: STATUTORY AND COMMON LAW ASSESSMENT CONSIDERED IN DETAIL

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This piece appears in Issue 31 of Kerry On Costs… And So Much More…, a fortnightly publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.

By subscribing to the Newsletter, you are entitled to a free copy of my 1300-page, three volume book Personal Injury Small Claims, Portals and Fixed Costs and also a free copy of my book of Qualified One-Way Costs Shifting, Section 57 and Set-Off.

In

Blacklion Law LLP v Amira Nature Foods Ltd & Anor [2021] EWHC B22 (Costs) (11 November 2021)

the Senior Courts Costs Office examined in detail the issue of solicitor and own client bills under the Solicitors Act 1974, including statute bills, Chamberlain bills, interim statute bills and non-statute interim invoices.

Here the claimant solicitors took proceedings against the defendants in relation to unpaid invoices relating to two retainers.

One was a general retainer covering a variety of matters and the other concerned services relating to a proposed bond issue which never took place; the proceedings here related only to the general retainer.

The claimant delivered 10 invoices and the defendants paid various sums, and there were some credit notes, leaving a balance of £118,510.81.

The defence relied upon the proposition that an alleged lack of particularity in relation to the services rendered failed to establish that the claimant solicitors had the right to render the invoices and the defendant had an obligation to pay them.

The defence did not deny or put the claimant to proof that the claimant’s general retainer invoices were valid statute bills.

Had it done so, it may have furnished a defence to the claim, forcing the claimant to deliver a final, valid bill.

The claimant obtained summary judgment from a Deputy Master with the amount of the costs to be assessed, together with orders as to the pleadings in the detailed assessment.

The defendant then sought a bill of costs of the client normally prepared for statutory detailed assessments under the Solicitors Act 1974, but the claimant said that the assessment ordered was a common law assessment and not a statutory assessment, and that the defendant was out of time to apply for a statutory assessment and that the court had no power to require the claimant to disclose the files.

The court here said that even if no statute bills had ever been rendered by the claimant under that general retainer, it was not appropriate to make an order now, as that would unpick the agreed arrangements embodied in the Deputy Master’s order, solely because the defendant, years into the litigation, wished radically to revise its position.

It also said that it had no power to order delivery of a statute bill in a particular format; only a solicitor can determine the content and terms of that solicitor’s claim for payment and neither the client, nor the court, can make that determination on a solicitor’s behalf.

The court held that on a non-statutory assessment it had power to order a breakdown of the solicitor’s bill and that its case management powers under the Civil Procedure Rules were not bound by 19th Century authority.

The court could make any order it saw fit in order to achieve the overriding objective and that included the delivery of a breakdown, if a breakdown is needed for the efficient and fair assessment of the solicitor’s bill.

The breakdown is a tool to assist the assessment of a non-statutorily bill, and not a replacement of it.

“77.       That is why, for example, where the solicitor has delivered a discounted bill and the client has applied under section 70 of the 1974 act for detailed assessment, the solicitor is entitled to produce a breakdown showing the full, undiscounted value of the work done and disbursements incurred. The client will then have to shoulder the burden of showing, by reference to the full breakdown, that the solicitor’s reasonable fees and disbursements are less than the amount of the bill actually delivered. If the breakdown is reduced by one fifth or more, but the bill is not, then the “one-fifth rule” embodied in section 70(9) of the 1974 Act will operate in the solicitor’s favour, not the client’s.”

The court held that the parties had by their conduct accepted that the bills were all statute bills and that was that.

The court doubted that it had an inherent jurisdiction to order a non-statutory assessment on an invoice that is not a final statute bill, as such invoice would have no legal force.

“93.       Even if this were a case, as the Defendants argue, in which the Claimant has never delivered a statute bill it is not a case in which it would be appropriate to exercise the court’s discretion to order that such a bill now be delivered. To do so would be to support a collateral attack upon the order made by Deputy Master Nurse on 15 February 2021, which sets out an agreed arrangement by which the earlier invoices rendered by the Claimant are to be treated as paid and settled, and the unpaid remainder are to be subjected to the scrutiny of the court. Nor do I have the power to order that the Claimant deliver a statute bill in any particular form.

94.         Both parties have, from the outset of this litigation to the judgment obtained by the Claimant on 15 February 2021, conducted these proceedings on the basis that all of the invoices rendered by the Claimant under the General Retainer had the status, whether individually or collectively, of a statute bill or bills. The judgment obtained by the Claimant, which sets out the terms of this assessment, is inconsistent with any other conclusion. It is too late for the Defendants now to attempt to argue a different case before me.

95.         If the General Retainer invoices are individual statute bills rather than a Chamberlain series, this court does not have the power to order the statutory assessment of those paid more than 12 months ago. If they do form a Chamberlain series, no order for statutory assessment could be made except under special circumstances, and no such circumstances have been shown.

96.         I am not persuaded that it is appropriate for me to restart the process of assessing invoices 304, 312, 314, 322 and 1179 by making an order either for the inspection of the Claimant’s files or for the Claimant to deliver a breakdown, but subject to submissions I do propose to review the information provided in support of the Claimant’s bills and the objections taken to them, to determine whether further directions may be needed.”

Written by kerryunderwood

December 2, 2021 at 1:48 pm

Posted in Uncategorized

CALDERBANK OFFER IS NOT THE SAME AS PART 36: COURT OF APPEAL

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This piece appears in Issue 31 of Kerry On Costs… And So Much More…, a fortnightly publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.

By subscribing to the Newsletter, you are entitled to a free copy of my 1300-page, three volume book Personal Injury Small Claims, Portals and Fixed Costs and also a free copy of my book of Qualified One-Way Costs Shifting, Section 57 and Set-Off.

In

McKeown v Langer [2021] EWCA Civ 1792 (26 November 2021)

the Court of Appeal firmly rejected a submission that a Calderbank offer had the same effect as a Part 36 offer.

Here, the court was considering the award of costs after the trial of a preliminary issue, and generally where a Part 36 offer has been made covering the entire action, but there has been a split trial, costs are deferred until the end of the case.

In some instances, the court had held that this is the correct course of action even if it is unaware as to whether a Part 36 offer has been made.

The logic of this policy is that, for example, a claimant may win on liability at the first part of a split trial, but then fail to beat the defendant’s Part 36 offer on quantum, meaning that in fact the losing defendant gets costs from the expiry of the date for accepting the Part 36 offer.

If the offer is made early enough, then a winning claimant can end up getting no costs at all, and owing the losing defendant a greater sum in costs than its pre-Part 36 offer costs.

This policy does not sit easily with another policy, which is that parties who lose on a specific issue should be ordered to pay the costs of that issue there and then, whatever the ultimate outcome of the case.

Here a Calderbank offer, but not a Part 36 offer, had been made, but the judge was not told who had made the offer, nor its terms, nor when it had been made.

This was a case where there was a petitioner and a respondent and then on appeal an appellant and a respondent, so it is confusing, and I will refer throughout to the paying party and the receiving party.

The judge found in favour of the original respondent, who I now call the receiving party, and ordered the paying party to pay £450,000 on account of costs.

Permission to appeal was granted on a single ground:

“The Judge was wrong in the circumstances of this case in concluding that he should not treat a Without Prejudice Save as to Costs (“WPSATC”) offer made by the appellant in the same way as a Part 36 offer for the purposes of CPR, r.36.16(3)(d) and (4) and r.44.2.”

The paying party argued that the judge had erred in not deferring costs until the end of the case, given that he knew an offer, albeit a Calderbank offer, and not a Part 36 offer, had been made.

The Court of Appeal here considered, in great and helpful detail, the case law in this difficult area, where there is a clear clash of principles.

The paying party argued that it was only in exceptional circumstances that a court could make an immediate costs order after a preliminary hearing, and that the circumstances would be “extremely rare ”.

There had to be no risk at all of any injustice caused by such an order, given that the ultimate costs order may be different, due to the offer made, be that a Part 36 offer or a Calderbank offer.

The court rejected that submission.

“30.       I do not accept the appellant’s analysis. This is essentially for three reasons which I develop below. First, because it is inconsistent with the language of CPR 42.2 which by its express terms confers a broad discretion upon a court and which makes the existence, scope and effect of admissible offers to settle but one of the factors which a court is required to take into account. Secondly, because it is inconsistent with the policy considerations which underpin CPR 42.2 which have been recognised by the courts. Thirdly, because nothing in the case law on either CPR 36 or CPR 42.2 compels such a conclusion.

The scope and effect of CPR 44.2 and CPR 36

31.         A number of points flow from the language of CPR 44.2. First, it confers an express power or discretion upon a judge to decide whether to make an order for costs. Secondly, if a judge decides to make an immediate costs order there is a duty (“will”) to have regard to “all the circumstances”. There is no fixed list of relevant circumstances. Thirdly, relevant matters that a court is required to take into consideration include those in CPR 44.2(a) – (c) which includes but is not limited to the existence of “admissible” offers to settle. Fourthly, where an offer to which the costs consequences under CPR 36 apply that would not be an “admissible” offer under CPR 44.2(c). There is no definition of “admissible” in CPR 44.2. Evidence might be inadmissible because it is simply irrelevant to the issue being determined and/or because it has a nil probative value.

32.         In the present case the parties agreed that the offer at that stage in the litigation could not be looked at and this was the basis for the appellant’s argument that the entire exercise should be deferred. On the express terms of CPR 42.2 a judge is entitled to conclude that an offer should not be taken into account yet proceed to make an interim order.

33.         CPR 44.2 is by its very nature different to CPR 36 which is a self-contained set of rules which departs from the more general rules in CPR 44.2 (see e.g. the analysis in the White Book (2021) paragraph [36.2.1ff]). The special rules in CPR Part 36 do not therefore govern or limit the broader discretion which arises under CPR 44.2 where there is no CPR Part 36 offer in play.

34.         I turn to the judge’s analysis. He held that the Calderbank offer was not admissible at the present stage of the litigation because it had not been placed before the Court (paragraph [30]). He rejected the proposition that the appellant could have it “both ways” by withholding “admission” but nonetheless requiring the court to take account of it. He considered that the offer had a nil probative value since it was incapable of being analysed and it was wrong to speculate about its terms. The Judge highlighted the practical difficulties of assessing an offer the nature and terms of which were undisclosed (paragraph [33]). Finally, he rejected a “read across” between CPR Part 36 and CPR 44.2 (paragraph [31]). He also observed, reflecting the differences between CPR Parts 36 and 44.2, that the appellant could have obtained protection from interim costs by making a CPR Part 36 offer, or by the making of an “O’Neill offer” (paragraph [32]).

35.         I agree with this analysis. The appellant’s submissions turn the language of CPR 44.2 upon its head. It entails the proposition that a Calderbank offer that is prima facie inadmissible: (i) becomes admissible; and (ii) acquires such compelling probative value that it ousts all the considerations that are otherwise required to be taken into account under CPR 44.2(4); and (iii) leads (subject only to exceptional circumstances) to a decision not to make any immediate costs order; and (iv), requires a legal effect equivalent to a CPR Part 36 offer to be accorded to a Calderbank offer even though Part 36 offers are excluded from the mandatory exercise of discretion under CPR 44.2(4)(c). The appellant’s submissions lead to these conclusions even though the court remains ignorant of the terms of the offer and whether, had it been disclosed, it would have made any difference to the outcome. The appellant’s submission is, in my view, inconsistent with the clear and express language of CPR 44.2.”

The court then went on to what it called policy considerations, including that costs follow the issue, rather than the event, because an overly robust application of a principle that costs should follow the final event discourages litigants from being selective as to the points they take in litigation and encourages an approach where by no stone is unturned.

This appears to miss the point that a party who conducts itself in that way is likely to be the subject of an indemnity costs order in any event, win or lose, and that a winning part who behaves badly stands to have its costs reduced by a percentage.

Indeed, when looking at the overall picture at the end of the case, the Senior Courts have moved strongly against issue based orders, where  one party gets the costs of some issues and another the costs of other issues, and simply reflects its view by awarding the successful party, say, 70% of its costs rather than 100% of its costs.

Here, the Court of Appeal also justified its decision by reference to the overriding objective, requiring them to help the court. It said that this served the good administration of justice by incentivising parties to conduct litigation professionally.

“40.       The appellant’s solution, if accepted, would represent the antithesis of good policy. It would reward bad behaviour, encourage the taking of unmeritorious points, exacerbate problems associated with the inequality of arms and accentuate the adverse litigation consequences of informational asymmetry.

41.         The appellant’s submission would, in my view, be an enticement to strategic gameplaying. On the appellant’s analysis a majority shareholder could instruct solicitors that if, following the hearing of a liability trial, an adverse draft judgment was sent to the lawyers by the court the solicitors should then serve an immediate, but derisory, Calderbank offer since this would, on the appellant’s analysis, prevent an otherwise nigh on inevitable negative costs order being made against the majority shareholder.

In spite of its reliance on general principles, the Court of Appeal nevertheless held that Part 36 was a different kettle of fish and provided “but scant guidance in a case not involving a Part 36 offer.”

The effect of this is that, to use the Court of Appeal’s own words, a derisory Part 36 offer made prior to a preliminary hearing will indeed protect the paying party to the end, but what might be a very generous Calderbank offer, and there are often very good reasons for making Calderbank offers rather than Part 36 offers, would not give the paying party such protection.

Indeed, one of the key reasons why parties make Calderbank offers, as compared with Part 36 offers, is that they give an ability to control costs, whereas an accepted Part 36 offer means that it is open house on costs for the receiving party.

The Court of Appeal also referred to the case of

Lifestyle Equities CV & Anor v Sportsdirect.Com Retail Ltd & Ors [2018] EWHC 962 (Ch) (20 April 2018

There the Deputy Judge refused to determine costs, whether incurred before or after the making of a Part 36 offer, upon the basis that it was

“…manifestly a disproportionate, inappropriate and unsatisfactory way of proceedings. If there is a Part 36 offer in play, then it is only following the completion of the quantum stage that it would be possible to discern who had been successful and who had not and whether the part 36 offer has any impact on the costs order that should be made” (paragraph [27]).

Here, the Court of Appeal said that that was wrong and that nothing in Part 36 preclude to a costs order being made in relation to costs incurred prior to a Part 36 offer.

Again, the Court of Appeal is missing the point here.

Supposing that the party making the Part 36 offer before the preliminary hearing had incurred £50,000 costs for the post Part 36 costs where likely to be £200,000.

The whole point is that the possible outcome, after the final trial, is that the winner will be writing a cheque. It makes no difference at all when the Part 36 offer was made as every litigation lawyer in the land is familiar with post Part 36 costs of a losing party being greater than the pre-Part 36 costs of a winning party.

In my view the judge in

Lifestyle Equities CV & Anor v Sportsdirect.Com Retail Ltd & Ors [2018] EWHC 962 (Ch) (20 April 2018

was spot on, and the Court of Appeal here is wrong, but I fully understand that this is a difficult area with a clash of different public policy principles.

Comment

Split trials are generally a waste of time and money, and a cause of great confusion. However, they still take place, and there needs to be a clear policy as to the costs position following such a preliminary hearing.

Most of us thought we had that, that is that generally no costs will be ordered at that stage, but the Court of Appeal now casts doubt upon that, although I understand the reason why.

As stated above, there is no logic in a court, following a preliminary hearing, awarding pre-Part 36 costs. That misses the point as to the potential effect of a Part 36 offer at the end of the case.

This may well have the opposite effect to that intended by the Court of Appeal, that is that parties will question the worth of making a Part 36 offer or a Calderbank offer.

Part 36 itself requires non-Part 36 offers to be taken into account.

There is a good reason for that, and there is often a very good reason for making a Calderbank offer, rather than a Part 36 offer.

Written by kerryunderwood

December 1, 2021 at 9:47 am

Posted in Uncategorized

PART 36: 99% EQUALS GENUINE OFFER TO SETTLE; FORMAL SERVICE REQUIRED; DAMAGES UPLIFT NOT ALL OR NOTHING; PART 36 CONSEQUENCES APPLY ONLY TO PART 36 OFFER, NOT WHOLE AWARD

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This piece appears in Issue 31 of Kerry On Costs… And So Much More…, a fortnightly publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.

By subscribing to the Newsletter, you are entitled to a free copy of my 1300-page, three volume book Personal Injury Small Claims, Portals and Fixed Costs and also a free copy of my book of Qualified One-Way Costs Shifting, Section 57 and Set-Off.

In

London Trocadero (2015) LLP v Picturehouse Cinemas Ltd & Ors [2021] EWHC 3103 (Ch) (19 November 2021)

a High Court Judge considered a whole range of important matters in relation to Part 36 offers, including:

  1. The need for formal service;
  2. the need for the receiving party to consent to service by email to validate service;
  3. the court’s power to remedy defective service;
  4. the effect on Part 36 consequences of defective service, even if cured:
  5. whether a 99% offer was a genuine offer to settle;
  6. whether the uplift on damages was “all or nothing”;
  7. the position where a claimant makes an offer in relation to part of the claim, and beats his offer and wins the whole claim.

In relation to service, the High Court Judge held the Part 36 offer to be valid, even though it was served by email and the receiving party had not given consent to service by email and thus the formal service provisions of CPR 6 were not satisfied.

The Civil Procedure Rules were changed in 2007 to require a Part 36 offer to be formally served, rather than simply receipt of the offer being proved.

The error of procedure here was either a failure to comply with paragraph 4 of Practice Direction 6 A by failing to verify that the defendant’s solicitors were willing to accept service by email, or a failure to comply with CPR 6.20, which specifies other methods of service.

The effect of CPR 3.10(a) is that the failure to comply with the rule/ practice direction does not invalidate the making of the Part 36 offer unless the court so orders; CPR 3.10(b) allows the court to make an order remedying the error.

No complaint was made about the method of service in the ten months between the service of the Part 36 offer and the trial.

“Although it may be unnecessary to do so, for the avoidance of any doubt, I will make an order either under CPR rule 3.10(b) or CPR rule 6.28 that the Part 36 offer is to be treated as having been validly made on 15 December 2020.”

The claimant beat its offer at trial.

The court held that it was a genuine offer to settle, withing the meaning of CPR 36.17(5), even though the only concession was forgoing interest, which amounted the just 1% of the total claim.

However, in dealing with the additional benefits, the court took into account the defective service as a factor justifying its decision not to award the claimant full benefits.

“45.       In my view, a further relevant factor to take into account is the defective service of the Part 36 offer. Although I have concluded that it is not in accordance with the overriding objective to invoke CPR Rule 3.10 (a) and make an order that the Part 36 offer has not been validly made, this is in my view a reason why it would be unjust to award the claimant the maximum available under CPR Rule 36.17.

46.         However, I do also bear in mind that the Part 36 regime is intended to encourage settlement of disputes and to reduce costs. The normal order is not intended to be purely compensatory but is a part of the mechanism through which that encouragement is achieved (OMV Petrom SA v Glencore International AG [2017] EWCA Civ 195). It is therefore in my view right that some of the consequences provided for by CPR Rule 36.17 should apply in this case given the third defendants’ failure to accept the Part 36 offer.”

The court also considered whether the additional amount of up to £75,000 is “all or nothing” and whether the court had power to award a lesser amount if the court considered that it would be unjust to award the full amount.

The court in fact decided not to award any additional amount and so did not need to rule on this point, but said that its provisional view was that the court did have such power to award a lower uplift on damages, and it was not an “all or nothing” provision.

There are conflicting High Court decisions on this point, and the court here referred to the interpretation of the wording in a court of appeal decision dealing with the issue of indemnity costs under CPR 36.17(4)(b).

In that case –

Thinc Group Limited v Kingdom [2013] EWCA Civ 1306

the Court of Appeal rejected an all or nothing approach in relation to indemnity costs, stating:

“the phrase ‘unless it considers it unjust to do so’ in CPR 36.14(2) and (3) bear the obvious interpretation of ‘unless and to the extent of’.”

“54.       Clearly there is a divergence of views in relation to this point at first instance and it can only be hoped that, at some point, the Court of Appeal will have the opportunity to resolve this uncertainty.”

The High Court also considered, apparently for the first time, the issue of whether the Part 36 consequences apply in relation to the whole of the claim or only that part in respect of which a Part 36 offer was made.

CPR 36.5(1)(d) allows for an offer to be made in relation to part of a claim.

The court held that it would be wholly disproportionate if a defendant who chooses not to accept a Part 36 offer in relation to a relatively small part of a claim is then saddled with all of the Part 36 consequences for all of the claims.

The court gave an example of a claimant bringing a claim worth £1 million in all and making an offer in respect of a part of the claim worth £100,000.

It said that it could not be right that, if the defendant chose not to accept that offer, and the claimant went on to win the whole claim, the defendant would then be liable for additional damages of £75,000, based on the £1 million total claim, rather than £10,000, based on the £100,000 to which the Part 36 offer related.

The court here said that that would be wholly disproportionate and that the references in CPR 36.17(4) to sums awarded and to costs must be interpreted as references to sums awarded or costs, as the case may be, in relation to the part of the claim in respect of which the Part 36 offer was made.

As the court here chose to make no uplift on damages, all of these comments are obiter, that is that they were not necessary for the decision, and accordingly are not binding on other courts.

The court held that any award should be based on the sum awarded and the costs incurred in relation to the part of the claim to which the Part 36 offer relates.

Comment

This is an important decision dealing with a number of aspects of Part 36, which remains the most difficult rule in the rule book.

Although the court adopted a lenient approach to defective service, it nevertheless took that defective service into account in not allowing the full Part 36 benefits.

Part 36 offers require formal service under CPR 6 and solicitors should always check that the other party has agreed to accept service by email.

The court’s decision that the uplift on damages does not need to be “all or nothing” does not take matters any further as there are already conflicting High Court decisions on this point, and this is another High Court decision.

As the court recognized here, it will be helpful if a matter soon reached the Court of Appeal for that court to give a definitive ruling on this point.

In the meantime, there will no doubt continue to be contested hearings on this point.

In relation to that part of the award to which Part 36 consequences must apply, my view is that the High Court is absolutely right, and it should only apply to that part of the offer made.

To take an extreme example a party could offer to accept, say, £5 in relation to a specific item in a claim worth £100,000, and then get £10,000 uplift if it won its claim.

That cannot be right.

It does however throw up the issue of what happens when a liability offer is made and the claimant wins, but where no offer on quantum has been made.

Does the court award an uplift on all damages, when no offer in relation to damages was made, or does it award nothing as no offer on damages was made, or does it go somewhere in between?

The case is also interesting in that it held that am offer to accept 99% of damages was a genuine offer to settle within the meaning of CPR 36.17(5).

Written by kerryunderwood

November 30, 2021 at 10:05 am

Posted in Uncategorized

COURT BUILDINGS EMBARASSING SAYS LORD CHIEF JUSTICE

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This piece appears in Issue 30 of Kerry On Costs… And So Much More…, a fortnightly publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.

By subscribing to the Newsletter, you are entitled to a free copy of my 1300-page, three volume book Personal Injury Small Claims, Portals and Fixed Costs and also a free copy of my book of Qualified One-Way Costs Shifting, Section 57 and Set-Off.

Appearing before the House of Commons Justice Committee in November 2021, the Lord Chief Justice said that the ramshackle nature of some court buildings is deterring lawyers from applying to become District Judges, and that the state of certain courts was an embarrassment which the public, court staff and judges should not have to tolerate.

He said that the recent spending review and the extra funding allocated to the justice system ignored the state of the buildings.

The shortfall in maintenance is something which has been recognised for years by government and yet the money necessary to deal with it – just to put the estate in a decent condition – has not yet been made available. Looking at everything that was said in the spending review documents I struggle to see where the money is for that, but I shall be pressing the Lord Chancellor nonetheless.

It would cost “hundreds of millions” to repair the buildings and the failure to invest was a material risk to reducing the backlog of cases.

He suggested that solicitors and barristers who would otherwise be tempted to apply for the bench are being deterred because their working life would be so much less comfortable.

In relation to recruiting District Judges the Lord Chief Justice said:

“I mean one of the things that worries me is that the district bench are disproportionally located in courts which are really not very good, and I think one has got to be realistic about this, that we are trying to recruit successful lawyers, solicitors and barristers who will not have spent the last ten or 15 or 20 years of their lives in buildings where the heating might not work or the air conditioning won’t work or the roof leaks or the loos leak, and so on

People coming from the legal profession are used to working in environments where the IT works and where there is appropriate staff support and so on. I think that this is one of the consequences of the degradation in the funding of the system that we have seen over many years, that the environment in which people are expected to work in many places is just not good enough.”

One of the Members of Parliament on the Justice Committee referred to:

“…the heating that is going wrong, the very poor upholstery, the peeling paint, the proliferation of buckets collecting drips left, right and centre because it makes for a very unwelcoming environment for the public, an unpleasant working environment also for those in the court system.”

In response the Lord Chief Justice said:

“When the ceiling falls down in a court, as it does from time to time, that court is out of action for some time. Every winter, we have not had the cold snap yet, but every winter we lose hearings because the heating has broken and there is a limit to how much you can expect people to sit in court in coats, in bobble hats and in gloves – you just cannot do that. In the summer, we have the reverse problem that in many of our buildings the cooling systems break down and they become intolerable. Every year, we have lifts breaking down, which take ages to repair, which means that courts cannot be used.”

On 22 November 2021, Tristan Kirk, the Courts Correspondent for the London Evening Standard tweeted

“It’s ludicrously cold at Inner London crown court this morning, where jurors have been told they can keep their hands, coats and gloves on if they want.

If this happened in an office block, or perhaps at Ministry of Justice HQ, people would be furious…”

Written by kerryunderwood

November 24, 2021 at 11:11 am

Posted in Uncategorized

THE SMALL CLAIMS PORTAL AND ENGLISH AS A FOREIGN LANGUAGE

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This piece appears in Issue 30 of Kerry On Costs… And So Much More…, a fortnightly publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.

By subscribing to the Newsletter, you are entitled to a free copy of my 1300-page, three volume book Personal Injury Small Claims, Portals and Fixed Costs and also a free copy of my book of Qualified One-Way Costs Shifting, Section 57 and Set-Off.

As we all know, the small claims portal was designed to enable litigants in person to use it, and we also know that it a dismal failure, with numbers down around 75%, and with just 9% of that remaining 25% being litigants in person.

To put it another way, of the pre-new portal cohorts, just 2.5% are using the new portal as litigants in person.

There is an additional problem in relation to potential users for whom English is a foreign language or a second language.

Translation fees are not recoverable in the portal process.

It is clear that most people, including many lawyers, for whom English is their first language, cannot understand the portal rules, and the even more incomprehensible Guide.

How on earth can a litigant in person for whom English is not their first language use the portal system?

Such citizens are effectively locked out of the justice system at this level.

Written by kerryunderwood

November 23, 2021 at 12:53 pm

Posted in Uncategorized

PORTALS ROUND-UP: PART 1

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This pieces below appeared in various Issues of Kerry On Costs… And So Much More…, a fortnightly publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.

By subscribing to the Newsletter, you are entitled to a free copy of my 1300-page, three volume book Personal Injury Small Claims, Portals and Fixed Costs and also a free copy of my book of Qualified One-Way Costs Shifting, Section 57 and Set-Off.

“Portals” is the term applied to what are technically two Pre-Action Protocols for Low Value Personal Injury Claims, one dealing with Road Traffic Accidents, and one dealing with Employers’ Liability/ Public Liability matters.

In the news feature of this issue, I report the proposal by the new Master of The Rolls to set up a portal system for every single civil case in England and Wales, so those of you who have never heard of the portals better get used to them.

This article is a Round-Up of recent portal cases, and obviously deal only with Personal Injury claims, as that is all that is currently covered by the portal system, but many of the principles dealing with matters such as counsel’s fees etc. will have application in all of the new portals coming soon.

Multiple Defendants: Settling With One

A claimant, in what would otherwise be a portal claim, proceeds against multiple defendants, thus automatically excluding the matter from the portal process, but ultimately resolves the matter with one defendant, meaning that the matter could, in retrospect, have gone on the portal.

Is such a matter, which never went on the portal, subject to the fixed costs regime or not?

The key case is

Williams v Secretary of State for Business, Energy and Industrial Strategy [2018] EWCA Civ 852

where the claimant’s solicitors pursued more than one defendant and therefore could not proceed via the portal.

However, the claim settled against just one of the parties, and was dropped against the other party, and the party which settled argued that fixed costs should apply as if the matter had proceeded through the portal, arguing that it could and should have proceeded in that way.

The court at first instance agreed with the defendant and limited the costs to fixed costs.

That decision was overturned on appeal and the matter was remitted for an assessment of costs.

The paying party appealed against that decision, arguing that the fixed costs rules should automatically apply.

The Court of Appeal rejected that submission, but held that in fact fixed costs should be the sum allowed, but via CPR 47, as compared to an automatic application of the fixed costs rules.

It puts claimant solicitors in a difficult position when faced with deciding which parties to proceed against, as if they believe that more than one defendant is liable, this will make them think twice about pursuing both before obtaining full and detailed evidence; the defendants’ insurers argue that full evidence should be gathered before proceedings are issued: claimants’ solicitors argue that it is not always straightforward.

If, as in this case, there are two or more potentially liable parties, how far must you go to establish potential liability before deciding how to proceed?

If you decide that you do not have enough information, you will wish to proceed against both.

However, if it turns out that one of those defendants was blame-free, the remaining defendants’ representatives will argue that the claim should have been against just one party, and therefore could and should have proceeded via the portal.

The court used Part 44 misconduct rules to penalize the claimant in costs.

Inevitably the courts apply hindsight when deciding whether the claimant’s solicitors’ conduct was reasonable or otherwise when a decision was made as to which parties to pursue.

What happens where liability apportionment is not obvious?

Do you:

1. bypass the portal and proceed against more than one defendant, knowing that if you drop the claim against one of the
defendants, you will only recover fixed costs unless you can prove that your decision to proceed against both was reasonable;

2. or proceed against one only and put it on the portal.

Either way you get only fixed costs.

In the case of example 1 above, how is the bill to be drafted?

After all, it is a standard basis assessment and the courts have said that a multi-item bill is unnecessary therefore you would still have to go via Part 47.15 to recover fixed costs, but it is unlikely that paying parties will pay the costs of that process.

The Court of Appeal has yet to address this as that was not a live point within the appeal.

Supposing the case was submitted on the portal against one defendant, and then dropped out and proceeded to litigation where other defendants were brought in and liability was then settled with one of the other defendants.

The fact that the matter was submitted on the portal seems to me not to be relevant; the issue is whether you should properly have proceeded only against the ultimate paying defendant, and dealt with the matter on the portal, and then that claim against a single defendant, would be subject to fixed recoverable costs.

There is a procedure within the portal to resend the claim notification form if it has been sent to the wrong defendant.

The relevant provision in the RTA portal is 5.2 which reads:

“Where the claimant has sent the CNF to the wrong defendant, the claimant may, in this circumstance only, send the CNF to the correct defendant. The period in paragraph 6.11 or 6.13 starts from the date the CNF was sent to the correct defendant.”

The relevant provision in the EL/PL portal is 5.2 which reads:

“Where the claimant has sent the CNF to the wrong defendant, the claimant may, in this circumstance only, resend the relevant form to the correct defendant. The period in paragraph 6.12 starts from the date that the form was sent to the correct defendant.”

This is a very similar situation to that in Williams, where it is likely that a court would only award fixed costs, albeit by way of assessment under CPR 47, rather than the automatic application of the fixed recoverable costs rules.

Infant Approval: No Counsel’s Fee In Fixed Costs Cases

The Court of Appeal decision in

Aldred v Cham [2019] EWCA Civ 1780

is obviously binding on all courts, but it is a little bit more than that in that the Supreme Court refused permission to the claimant to appeal against that decision saying that the application did not raise a point of law of general public importance which ought to be considered at this time, but adding that it thought it appropriate for the Civil Procedure Rules Committee to reconsider the rule preventing the recoverability of counsel’s fees in such cases.

By adding that extra comment, the Supreme Court was not just refusing permission to appeal, but going further and stating that the Court of Appeal had got the law right.

For all intents and purposes, the decision in Aldred v Cham is a Supreme Court ruling.

In

Aldred v Cham [2019] EWCA Civ 1780

the Court of Appeal held that counsel’s fees, necessary for an approval hearing, fell within the fixed recoverable costs scheme and could not be separately recovered as a disbursement “reasonably incurred due to a particular feature of the dispute”.

At paragraph 3 of the judgment, the Court of Appeal set out the issue:

“3. The issue that arises in the present case concerns the recoverability of the cost of counsel’s advice as to the quantum of the proposed settlement of the RTA claim, in a case where the claimant is a child. The question for this court is whether that is a claim for a disbursement which should be allowed (in addition to the fixed recoverable costs) because, in the words of the relevant rule, it was “reasonably incurred due to a particular feature of the dispute”. That simple question is then said to raise other issues, some arising out of the use of similar wording in other parts of the fixed recoverable costs regime”.

The Court of Appeal, correctly in my view as the Civil Procedure Rules stand, held that the particular characteristics of a claimant did not amount to a “particular feature of the dispute”.

The relevant rule is CPR 45.12 which reads:

“45.12

(1) The court –

(a) may allow a claim for a disbursement of a type mentioned in paragraph (2); but

(b) will not allow a claim for any other type of disbursement.

(2) The disbursements referred to in paragraph (1) are –

(a) the cost of obtaining –

(i) medical records;

(ii) a medical report;

(iii) a police report;

(iv) an engineer’s report; or

(v) a search of the records of the Driver Vehicle Licensing Authority;

(b) where they are necessarily incurred by reason of one or more of the claimants being a child or protected party as defined in Part 21 –

(i) fees payable for instructing counsel; or

(ii) court fees payable on an application to the court; or

(c) any other disbursement that has arisen due to a particular feature of the dispute.”

The Court of Appeal then said:

“21. In this way, r.44.12(2)(b) provides a particular route for the recovery of counsel’s fees, over and above the fixed recoverable costs, “where they are necessarily incurred by reason of one or more of the claimants being a child or protected party”. There is then what has been called a catch-all[2] at r.45.12(2)(c), in respect of “any other disbursement that has arisen due to a particular feature of the dispute.”

Where the claimant is a child, Table 6 of the fixed recoverable costs scheme, applicable when the claim remains within the portal process, expressly provides that the cost of the advice on the amount of damages is included within Type C fixed recoverable costs in the sum of £150. (Paragraph 24).

Disbursements are governed by CPR 45.19 which does not contain a provision in the list of allowable disbursements for the cost of instructing counsel to advise on settlement where the claimant is a child.

Here the Court of Appeal said:

“That is probably because, as we have seen, the cost of that advice is already included in the fixed costs at Table 6”. (Paragraph 25).

CPR 45.19(2)(e) nevertheless retains the “any other disbursement that has risen due to a particular feature of the dispute” provision.

CPR 45.29 governs ex-portal claims and CPR 45.29I(2)(h) contains a slightly differently worded exception:

“..any other disbursement reasonably incurred due to a particular feature of the dispute”.

The District Judge and, on appeal, the Circuit Judge, both allowed counsel’s fee for the advice on settlement under CPR 45.29I(2)(h).

The Court of Appeal set out in full the relevant provisions of the Civil Procedure Rules but said the issues could be narrowed down to:

1. Was counsel’s advice “due to a particular feature of the dispute”?

2. If so, was the cost of the disbursement reasonably incurred so that the court should allow recovery of it in addition to the
fixed recoverable costs?

The Court of Appeal said that there was no reported decision on the point but considered two first instance decisions relating to the cost of translators where the issue was whether the fact that a claimant was not an English speaker meant that the fee was as result of “a particular feature of the dispute”.

The two judges at first instance had reached different conclusions.

In

Olesiej v Maple Industries, Liverpool County Court, 4 January 2012

the judge refused to allow recovery, holding that the disbursement arose from a characteristic of the claimant and not out of a particular feature of the dispute.

In

Madej v Maciszyn [2013] Lexis Citation 143

the Senior Courts Costs Office allowed recovery, stating that a claimant’s personal characteristics can amount to a particular feature of the dispute.

The Court of Appeal here held that counsel’s fee was not recoverable:

“35. Having considered these careful judgments, I prefer the approach of HHJ Wood QC. The fact that, in a particular case, a claimant is a child, or someone who cannot speak English, or who requires an intermediary, is nothing whatever to do with the dispute itself. Age, linguistic ability and mental wellbeing are all characteristics of the claimant regardless of the dispute. They are not generated by or linked in any way to the dispute itself and cannot therefore be said to be a particular feature of that dispute.

36. The particular features of the dispute in an RTA claim will commonly be matters such as: how the accident happened, whether the defendant was to blame for the accident, the nature, scope and extent of the injuries and their consequences, and other matters of that kind. For example, the particular circumstances of the accident may be sufficiently unusual to require an accident reconstruction expert, or the injuries may be so complex that they require a number of different experts’ reports. Such additional involvement of experts may also require specific advice from counsel. Depending always on the facts, such costs may be said to be a disbursement properly incurred as a result of a particular feature of the dispute.

37. In contrast, the cost of counsel’s advice in the present case was not necessitated by any particular feature of the dispute, and was instead required because it is an almost mandatory requirement in all RTA cases where the claimant is a child. It was therefore caused by a characteristic of the claimant himself and does not fall within the exception.

38. I reach that conclusion based on the plain words of r.45.29I(2)(h). I do not derive any particular assistance in that interpretation from the similar words used in r.45.12(3)(b) and r.45.19(2)(e), in Sections II and III of Part 45 respectively. However, I do consider that my reading of these words, which would limit recoverability of sums over and above the fixed costs to disbursements due to specific features of the dispute which has arisen between the parties, is consistent with the overall purpose of the fixed recoverable costs regime, and in particular its aim of ensuring that, save for express exceptions, the amount recoverable is limited to the sums set out in the tables by way of fixed recoverable costs. I come back to that topic again, in a slightly different context, in the next section of this judgment.”

The Court of Appeal said:

“If an item of work is deemed (or can be said implicitly) to be within the fixed recoverable costs in Table 6B, then it will not be separately recoverable as a disbursement. The brief fee is the most obvious example of that analysis”. (Paragraph 51)

The Court of Appeal also held that it was irrelevant that some parts of the Civil Procedure Rules did provide for an additional fee for counsel in these circumstances.

It said that the figure in Table 6B is higher than in Table 6 and “the comparison cannot prevent the conclusion that, for Table 6B, the cost of a child settlement advice is included in the stated fixed costs.”

Note that the decision to the contrary in

Dover v Finsbury Food Group Plc [2019] EWHC B11 (Costs)

by Master Brown in the Senior Courts Costs Office, given just 15 days earlier than this decision and coming to a contrary conclusion is clearly wrong.

Medical Agency Fees Not Recoverable In Fixed Costs Cases

In

Powles v Hemmings, St. Helens County Court, 23 April 2021: F20YM309

a Deputy District Judge held that in a fixed recoverable costs case, the medical agency fees, as compared with the actual fee of the expert, are not recoverable from the defendant as a disbursement as they were already provided for in the level of fixed recoverable costs.

Here, the expert’s fee was £350, with the agency charging an additional £400.

There is confusion over the issue.

In

Beardmore v Lancashire County Council, 1 February 2019: E10LV801

a Circuit Judge allowed such agency fees.

However, in

Aldred v Chan [2019] EWCA Civ 1780

the Court of Appeal refused to allow counsel’s fees as a disbursement in a fixed recoverable costs case, even though it was to deal with the extra work of an infant approval hearing.

The court here held that it was bound by that decision, which applied also to matters such as medical agency fees.

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

8. The defendant argues that, effectively, the claiming of these additional items of expense from the breakdown provided really a double accounting; effectively, it is seeking to claim profit costs twice, or items of work which should be claimed within profit costs twice.

9. Miss Halliwell takes me to paragraph 50 of Aldred v Chan which does, I agree, quite clearly say that disbursements are one-off items which are for specific items of work, not easily addressed by reference to the same general considerations that we have discussed. I agree with her, to the extent that, yes, a disbursement is a specific item of work which is not easily addressed by reference to these considerations, but the disbursement in question in this report amounts to £350 plus VAT because that is what the claimant’s own breakdown tells me it is. The claimant’s own breakdown goes on to tell me that the remainder of the charge, the remaining £400, relates to various items of agency work, which from the submissions that I have heard and the authorities that I have been referred to, for the reasons that I have set out, I find are not recoverable in this case. They are items which, in my judgment, fall fairly and squarely within the analysis of their Lordships in Aldred v Chan as being items which are part and parcel of the fixed recoverable costs within table 6B of CPR 45.29C, so as a consequence, the psychological report in this case will be limited to the figure set out in the claimant’s own breakdown which is £350 plus VAT.

Medical Reports In Portal

In

Mason v Laing, Bradford County Court, 20th January 2020

a Circuit Judge on appeal, held that the Road Traffic Accident Portal meant that only one medical report could be relied upon, unless a further medical report is recommended by the first expert and that first report has first been disclosed to the defendant (Paragraph 7.8B(2)).

The claimant brought a road traffic accident personal injury claim in the portal and instructed an expert whose report was not disclosed, and then obtained two further reports and disclosed all three to the defendant and sought to rely on them at a Stage 3 damages hearing.

The Deputy District Judge held that there was no discretion to consider anything other than the first report.

On appeal, the Circuit Judge upheld that ruling.

Practical Tips

In any portal case where there is a problem with the medical report, either because it is unsatisfactory, or it recommends further medical reports, read and check the portal rules carefully and seek advice if you are unsure.

Product Liability Claims

Do product liability claims, which can be, and usually are, hybrid claims, go on the employer’s liability/ public liability portal, or are they excluded from the portal process as other protocols apply, meaning that there would be a duplication of protocols in the same action.

The oft-quoted case of

Williams v Secretary of State for Business, Energy and Industrial Strategy [2018] EWCA Civ 852

has no bearing on this specific point, as that was clearly an employer’s liability matter.

I am unaware of any superior court decision on the point.

The issue of hybrid claims with different rules and protocols applying comes up in the context of Qualified One-Way Cost Shifting, that is if a claim is partly a personal injury claim, and partly another type of claim, does Qualified One-Way Cost Shifting apply to the whole of the claim or part of the claim or none of it?

In any event a claim dropping out of the portal system will often the subject to a different protocol, namely the general personal injury protocol.

An example of a hybrid claim which, in my view does go on to the public liability portal, is a claim for false imprisonment and/or wrongful detention, provided that there are physical injuries.

Another example is a housing disrepair claim which includes a claim for damages for a specific accident/illness linked to the housing disrepair.

Again, in my view such a matter is not excluded from the portal process; obviously an illness linked to housing disrepair would be excluded by paragraph 1.1 (18)(ii)(b) of the portal which states that a public liability claim: –

“does not include a claim for damages arising from a disease that the claimant is alleged to have contracted as a consequence of breach of statutory or common law duties of care, other than a physical or psychological injury caused by an accident or other single event;”

The basic structure of the portals is that everything goes on, subject to exceptions, and the argument is that:

“if the drafters of the Protocol intended on it applying to breach of contract, they would have undoubtedly made it clear in this definition.”

cuts both ways in that it could be argued that if the drafters of the protocol intended to exclude such claims, then that could have been made clear and listed as an exclusion, as are many other matters and situations.

This will soon be of historical interest as all civil claims, subject to very few exceptions indeed, valued at £100,000 or less, will soon be subject to fixed recoverable costs and therefore there will be no significant difference, if any, between a portal claim and a claim that did not, or should not, ever have gone on the portal.

Indeed, it is perfectly possible that the fixed recoverable costs for a breach of contract claim will be less than for a public liability claim.’

Likewise claims under the Consumer Protection Act 1987.

Product Liability Claims Go On Portal

I am grateful to Angus Fergusson and Gareth Edwards of Mooneerams Solicitors for details of this case.

In

Pearce v MPL Home Limited and Senza Group Limited, Cardiff County Court, 17 March 2021, Case G01CF447

a District Judge held that a product liability claim is an Employers’ Liability/Public Liability portal claim, and therefore subject to the fixed recoverable costs scheme.

The court rejected the claimant’s argument that the complexity of product liability claims meant that they were unsuitable for the portal process. It pointed out that a matter where liability was denied, or contributory negligence alleged, fell out of the portal (paragraph 6.13), and that paragraph 7.59 allows a claimant to give notice to the defendant that the claim is unsuitable for the protocol and specifically because there are complex issues of fact or law.

The claimant also argued that a claim for product liability can be a breach of contract claim which falls outside the definition of a public liability claim in paragraph 1.1(18) of the protocol.

The court said that that may be the case if a claim was solely a breach of contract claim, but that was not the case here.

Consequently, the court held that this was a claim which should have been commenced in the Employers’ Liability/Public Liability portal, and therefore fixed recoverable costs apply.

Comment

A correct decision in a difficult area of law and adopting my view in my blog;

PORTALS – EMPLOYERS’ LIABILITY OR PUBLIC LIABILITY?

and pages 21-23 of Issue 4 of Kerry on Costs… And So Much More…

Consumer Protection Act Claims

Section 2 of the Consumer Protection Act 1987 states:

(1) Subject to the following provisions of this Part, where any damage is caused wholly or partly by a defect in a product, every person to whom subsection (2) below applies shall be liable for the damage.

(2) This subsection applies to—

(a) the producer of the product;

(b) any person who, by putting his name on the product or using a trade mark or other distinguishing mark in relation to the product, has held himself out to be the producer of the product;

(c) any person who has imported the product into a member State from a place outside the member States in order, in the course of any business of his, to supply it to another.

Do such claims fall within the PL Portal, that is, is it a breach of a statutory duty?

By virtue of section 2 of the Consumer Protection Act, those listed have a statutory duty not to cause damage which is caused wholly or partly by a defect in a product.

The fact that it refers to three different types of people, seems to me to make no difference.

Thus, a producer of the product is in breach of the duty and so is any person who, by putting his name on the product or using a trademark or other distinguishing mark in relation to the product, has held himself out to be the producer for the product, and so is any person who has imported the product into a member State from a place outside the member States in order, in the course of any business of his, to supply to another.

Indeed, it seems to me that this is far more an incident of breach of statutory duty rather than a straightforward injury.

Without the statute, that is the Consumer Protection Act, arguably those mentioned in section 2(2)(b) and (c) would have no liability.

Thus, the section creates a liability on a person who puts his name to the product or imports the product etc., over and above the common law duty on the producer.

How does one plead the matter in a statement of case?

By saying

“…is in breach of its duty under section 2 of the Consumer Protection Act…”?

The Portal definition is intended to be inclusive and the exclusion is contained at paragraph 1.1(18)(b) where it says that a public liability claim does not include a claim for damages arising from a disease that the Claimant is alleged to have contracted as a consequence of breach of statutory or common law duties of care, other than a physical or psychological injury caused by an accident or other single events.

Had the portal intended to exclude any other type of public liability claim, one would have expected it to do so there.

Paragraph 4.3 of the portal lists another series of exceptions, and this is not one of those exceptions, although if the matter was never potentially on the portal it does not need to be excluded.

Case law on other matters shows that it is the intention, where possible, that claims should be in the portal, rather than outside it and my view is that, on balance, a court is likely to find that this is indeed a portal claim.

A Court may take a different view.

Motorcycle Riders: Are they “Occupants” of A Vehicle?

The Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents defines a soft tissue injury claim at Paragraph 1.1 (16A) and reads:

“’soft tissue injury claim’ means a claim brought by an occupant of a motor vehicle where the significant physical injury caused is a soft tissue injury and includes claims where there is a minor psychological injury secondary in significance to the physical injury…”

Is a rider of a motorcycle an “occupant” of a vehicle for the purposes of that definition?

Clearly a motorcycle is a vehicle and therefore the issue is whether a rider is an occupant.

We tend to think of an occupant as someone being inside something, and hence the issue over a motorcycle rider.

However, it has a far wider meaning, especially in the law, and one can occupy land by simply being on it and one can occupy an office or position, which is of course where the word “occupation” comes from.

One of the meanings of to occupy is to make use of, or to use a thing.

Nowhere is there any requirement that a person physically be inside something.

If, in the street, you were asked the question:

“Are you the occupant of 10 High Street, Anytown?”

and you lived there, you would reply that you were, even though you were in fact in the street and not in that house at that time.

So, my view is that a motorcycle rider is indeed an occupant of a vehicle for the purposes of the Pre-Action Protocol.

However, what about the person in a motorcycle sidecar, or sitting in a trailer being pulled by a vehicle?

That seems to me to be much harder. You could argue that a sidecar is physically part of the motorcycle, but it can be detached, and the very name suggests that it is not part of the motorcycle.

Likewise, a trailer. If a trailer was part of a vehicle, but then the connection breaks and it runs free and is involved in an accident, does it cease to be a vehicle, and therefore the people in it cease to be occupants of a vehicle, the moment the link breaks?

What about a caravan being towed?

The rules are far from clear, and “occupant” is a really unhelpful and unfortunate word.

However, I think a motorcycle rider must be an occupant.

In my book Kerry on Personal Injury Small Claims. Portals and Fixed Costs I said this:

“Occupant of a motor vehicle

The term “occupant” causes problems and it is not clear why it is used. The term does not appear elsewhere in the portal and it is not a requirement that a person be an occupant of a motor vehicle in order for the matter to go onto the portal.

It may be that the Ministry of Justice perceived that it was only occupants of motor vehicles who were likely to bring fraudulent claims, a point of key relevance in relation to the proposed restriction on the right to bring general damages claims for minor soft tissue injuries.

Motorcycles

Is a motorcyclist “an occupant of a motor vehicle”? Clearly a motorcycle is a motor vehicle but is a person sitting on it an “occupant”?

Sidecars

What about sidecars?

Motor vehicle

I consider elsewhere the definition of a motor vehicle; here I am simply looking at the additional requirement in a soft tissue injury claim that the person be an occupant of such a vehicle.”

Part 8 To Part 7

In

Lyle v Allianz Insurance plc Case No A00CH865, Chester County Court 21 December 2017

the Circuit Judge, on appeal, considered whether the court has a power to direct that proceedings that were issued pursuant to CPR 8, to protect the claimant’s position on limitation, but were stayed to allow compliance with the RTA Protocol, pursuant to Paragraph 16.2 of Practice Direction 8B, could be directed to continue as Part 7 proceedings.

There is no reported authority on this point.

The defendant submitted that where the claimant wished to proceed for a sum above the portal limit, then it had to start fresh proceedings under Part 7.

The Circuit Judge, as had the District Judge, rejected that submission and held that the court had power to direct that such a matter could continue as Part 7 proceedings.

Nevertheless, on the particular facts of this case, the District Judge had been correct to refuse to lift the stay, effectively meaning that the claim was struck out.

There had been years of delay by the claimant in seeking to exit the portal, due to value, even though it now valued the claim at over £200,000.00, as compared with the upper portal limit at the time of £10,000.00.

Even now, six years on the schedule of loss was described as “provisional.”

The defendants had been prejudiced in that they had been unable to object to the choice of medical experts, as the portals, being streamlined procedures, do not allow for that.

The Circuit Judge also said that the White Book was plain wrong on this point.

Quelle Surprise.

On 16 December 2020 a Deputy Master held that the court had no jurisdiction to order the transfer of proceedings from Part 8 to Part 7 after the judge had made an order approving liability on behalf of a child.

I am grateful to Gordon Exall of Counsel – Civil Litigation Brief for information concerning this case.

Liability was agreed in relation to injuries sustained by a child claimant who then issued Part 8 proceedings and the judge approved the order and directed that a Case Management Conference be held to determine whether the matter should proceed under Part 7 in relation to the assessment of damages, and this was that hearing.

The claimant argued that there was no action outstanding in relation to which directions could be made but the defendants argued that the claimant had agreed to a Case Management Conference and that CPR 8.1(3) gave the court a power “at any stage” to transfer Part 8 proceedings to Part 7.

Holding that the court had no jurisdiction, the Master said that the Part 8 proceedings had ended, apart from bringing its terms into effect and the consent, or otherwise, of a party could not give the court jurisdiction.

Consequently, any party who wants Part 8 actions to continue in Part 7 needs to obtain an order transferring the matter to Part 7 before approval takes place.

Old Predictive Costs Live On If Claimant Dies

In

West v Burton [2021] EWCA Civ 1005

the Court of Appeal held that a case pursued by the estate of a deceased person was not subject to fixed costs under Section III or IIIA of the CPR 45, but rather Section II of CPR 45, that is the old “predictive costs” regime.

It was common ground that the costs under the old regime would nearly always be higher than under the new one.

The claimant brought a portal claim in respect of a road traffic accident injury, but no admission was made and so the matter exited the portal, and unconnected with the accident, the claimant died.

The defendants were informed, and a Grant of Probate was sent to the insurer, who made a Part 36 offer of £1,375, which was accepted.

Proceedings were not issued in the substantive case, but only in relation to costs.

The Court of Appeal described the applicable parts of the Civil Procedure Rules and the protocol as “something of a mouthful”. (Wait until you see the new ones!).

Essentially, the issue was whether the executor was bringing a fresh claim that had never been in the portal, and was therefore not caught by the rule that an ex-portal claim is subject to the fixed recoverable cost scheme unless and until allocated to the multitrack, or not.

The District Judge, Circuit Judge and the Court of Appeal all held that the executor was not the same as the “claimant” referred to in the portal process.

The outcome would have been the same even if the claimant had not exited the portal; the provisions of Section III would not have come into play, and thus the case would still have been a Section II case, that is an old “predictive costs” case.

39. If a “claim” and “claimant” for the purposes of the fixed costs regime are to be equated with the meaning which they conventionally bear in the context of legal proceedings, then, given the provisions of s.1(1) of the 1934 Act and CPR r 19.8, the force of Mr Mallalieu’s arguments is clear-cut. But I do not consider that is how this scheme works. As the Judge noted, the word “claim” (and thence “claimant)” is not here being used in the Protocol in a formal sense. Rather it is being used as descriptive of a demand for damages prior to the start of any legal proceedings. Indeed, it is noticeable that, under the Protocol, a defendant is defined so as (primarily) to connote the insurer. The definition of “claim” in paragraph 1(6) of the Protocol is thus not to be equated with the definition of “claim” contained in CPR r.2.3. Read as a whole, the Rules and the Protocol are, in my opinion, drafted on the footing that the claimant throughout remains the person who issued the CNF. By way of example, that is illustrated by the entitlement to an increase in fixed recoverable costs by reference to a specified area “where the claimant lives and works …. and instructs a solicitor who practises in that area”: (see CPR r. 45 (11)(2); 45.18(5); 45.29C(2)). That is also, in my opinion, the general tenor of the Protocol. For example, paragraphs 7.6 and 7.7 of the Protocol refer to photographs of “the claimant’s” injuries and to situations where “the claimant” is not wearing a seat-belt. Likewise, paragraph 7.8 refers to situations where “the claimant” is receiving continuing medical treatment. All this connotes that, for the purposes of the Protocol, the claimant throughout is regarded as the person who was involved in the road traffic accident. Furthermore, r.45.29A and r.45.29B are in terms confined to claims started under the Protocol. I consider, accepting the submissions of Mr Williams, that in this case the claim that was settled was that of Mr West. But Mr West was not himself the person who started the claim, within the meaning of the Protocol. Indeed, as executor he never could have started such a claim, given the provisions of paragraph 4.5(3) of the Protocol. Consequently, this was not a claim, for the purposes of assessing costs, within the ambit of CPR r.45.29A or r. 45.29B. Accordingly, costs fall to be assessed by reference to Section II.

41. It seems to me that such an interpretation is also supported by purposive considerations. I do not say, any more than did Mr Williams, that the interpretation argued for by Mr Mallalieu gives rise to a result devoid of all sense: and Mr Mallalieu was also entitled to rely on the “swings and roundabouts” elements inherent in the overall scheme, as explained by the Court of Appeal in Hislop v Perde (cited above). But his suggested safeguards against potentially unfair results did not, with respect, strike me as being very cogent in this context. For example, the strict approach taken by the Court of Appeal in Cham v Aldred (cited above) suggests that any claim to recover as a disbursement the costs of obtaining a Grant (or the appointment of a trustee in bankruptcy etc.) would not prosper. Nor is it at all easy to see how death (or bankruptcy etc.) could be viewed as an “exceptional circumstance” for the purposes of the Rules. This can matter. For example, the only reason in some cases (the present case may or may not be one, it is not altogether, on the evidence, clear) for obtaining a Grant of Representation may be to pursue a personal injury claim. If that is so, then the costs of doing so potentially may, in the event of a successful outcome, be requested as part of the costs of and incidental to the claim. But, in a situation such as the present, such a request is, on the appellant’s arguments, prospectively altogether excluded as being recoverable or otherwise compensated by a higher rate of recovery of fixed costs and disbursements. It is difficult to think that such an outcome was contemplated by the overall scheme.

A new Small Claims Portal came into effect in relation to Road Traffic Accidents occurring on or after 31 May 2021, but the law in relation to Portals as set out above continues for pre-31 May 2021 claims, and for claims that do not fall into the new Small Claims Portal, and the principles, where relevant, are likely to be followed by courts dealing with claims formerly in the Small Claims Portal.

Although the new Small Claims Portal was designed for use by litigants in person, the take up has been very low, with under 10% of claims being entered on the Portal being by litigants in person.

Written by kerryunderwood

November 4, 2021 at 11:50 am

Posted in Uncategorized

COSTS OF PREPARING FUNDING AGREEMENTS

with 2 comments


This piece appears on pages 30-31 in Issue 4 of Kerry On Costs… And So Much More…, a fortnightly publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.

By subscribing to the Newsletter, you are entitled to a free copy of my 1300-page, three volume book Personal Injury Small Claims, Portals and Fixed Costs and also a free copy of my book of Qualified One-Way Costs Shifting, Section 57 and Set-Off.

Generally, the cost of preparing funding agreements is an overhead of the business and can neither be recovered from the other side, nor from your client.

That is an entirely separate issue from legal work in connection with the case being done before the Conditional Fee Agreement is entered into, and that problem can usually be solved by making the Conditional Fee Agreement retrospective to the point where the work started.

I appreciate that there is a certain logical problem with that, in the sense that the client will then be charged for work done before the agreement was drafted and explained to the client, but the courts have always been happy with that rather pragmatic approach.

The courts dislike backdating, but have had no problem with retrospection.

Consequently, billing for pre-Conditional Fee Agreement work on the actual case can be achieved by making the Conditional Fee Agreement retrospective.

That does not deal with the issue of the costs of drafting the Conditional Fee Agreement; you are not able to recover those.

Drafting it should take a professional secretary no more than 30 minutes if you are using my precedent; treble that if you are a lawyer pretending that you can type.

It is simply a question of inserting the name and address of the client and the relevant details about the cause of action, and that is it, assuming you work on a standard percentage uplift and cap the total of the costs charged to the client, and not just the success fee, as you are now required to do in any event by the decision in

Belsner v Cam Legal Services Limited [2020] EWHC 2755 (QB)

Consequently, if you adopt the Underwoods Method, then the drafting of the Funding Agreements should take very little time indeed.

In my firm this is all done by the secretarial team in Wellington in South Africa.

The secretarial team has all of the information from the standard file opening sheet and so deals with the Client Care Letter, any Appointment Letter, the Costs, Next Steps and Timetable Schedule, and the Conditional Fee Agreement.

My colleagues in South Africa, who do this all of the time, both for my firm and other law firms, say that a realistic time for this work is 30 minutes.

To put this in context, the people here have said that they could easily do 10 in a day, and our charge for offshoring secretarial work works out £50 a day, and obviously we are making a profit on that, and so the actual cost to you need be no more than £5 per set of Funding Agreements.

The detailed explanation, so that the client is held to have given informed consent, is a different matter.

In

Vilvarajah v West London Law Ltd [2017] EWHC B23 (Costs)

the judge said:

“I would expect to see a letter from the Defendant [solicitors] to the Claimant in advance of the meeting on 7th January 2013 explaining the options clearly. I would expect that letter or a subsequent letter, still in advance of the meeting, to enclose a draft of the proposed conditional fee agreement and to explain its terms so that the Claimant would have an opportunity to consider it before the meeting and think about whether there was anything which required explanation. I would expect the solicitor to be able to produce an attendance note of the meeting at which the agreement was signed recording precisely what explanation she gave of it to the Claimant. I would then expect to see a letter sent to the Claimant after the agreement was signed enclosing a copy of the agreement and explaining the key points.”

That is as clear as it gets, and any idea of not explaining the Conditional Fee Agreement personally, and of course now that can be done by Zoom or Microsoft Teams, and relying on a written explanation or an agent, runs the very real risk of the agreement being held to be void due to a lack of informed consent.

The Court of Appeal decision in

Herbert v HH Law Limited [2019] EWCA Civ 527,

upheld a lower court decision to reduce the success fee, due to the lack of informed consent, but in

Belsner v Cam Legal Services Limited [2020] EWHC 2755 (QB)

the court disallowed all costs on the basis that as there was no informed consent, there was no entitlement to costs over and above those recoverable from the other side.

In Vilvarajah, which effectively the High Court and Court of Appeal followed in Herbert v HH Law and Belsner v Cam Legal Services Limited respectively, the court went on to say that even though there had been a 30-minute appointment with a verbal explanation, this was insufficient in the absence of any prior or subsequent communication with the client.

Each case will depend upon its own facts, and a fairly simple personal injury case where all costs charged to the client are capped at say 25%, and where the solicitors are funding the disbursements, and where Qualified One Way Costs Shifting applies, may well be capable of being dealt with in around one hour of face to face personal explanation to the client.

However, in a heavy case, whether that be commercial law or any other type of work, where there are issues of After-the-Event insurance, heavy disbursements, including experts etc., and who pays them, I would expect the whole consideration of the issue of funding, and the explanation, and genuinely satisfying yourself that the client has given informed consent, and dealing with any client concerns, to take at least four hours.

Written by kerryunderwood

November 3, 2021 at 10:45 am

Posted in Uncategorized

PARENTAL INDEMNITY

with 2 comments


This piece appears on page 27 in Issue 4 of Kerry On Costs… And So Much More…, a fortnightly publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.

By subscribing to the Newsletter, you are entitled to a free copy of my 1300-page, three volume book Personal Injury Small Claims, Portals and Fixed Costs and also a free copy of my book of Qualified One-Way Costs Shifting, Section 57 and Set-Off.

It is a serious disciplinary offence ever to settle a minor’s case by way of a parental indemnity.

Under no circumstances whatsoever can a matter involving a child be settled other than by way of a formal Infant Approval hearing.

Until recently, the regulators took a fairly relaxed approach to this, bur courts have made it clear that it is, for all intents and purposes, contempt of court by a solicitor to resolve a matter by way of Parental Indemnity.

Such settlements are not binding and can be reopened for up to three years after the infant obtains his or her majority, that is their 21st Birthday.

The courts have stated that one of the key functions of the court is to protect those lacking capacity and that they guard that function jealously.

CPR 21.10 could not be clearer:

(1) Where a claim is made –

(a) by or on behalf of a child or protected party; or

(b) against a child or protected party,

no settlement, compromise or payment (including any voluntary interim payment) and no acceptance of money paid into court
shall be valid, so far as it relates to the claim by, on behalf of or against the child or protected party, without the approval of
the court.

(2) Where –

(a) before proceedings in which a claim is made by or on behalf of, or against, a child or protected party (whether alone or with
any other person) are begun, an agreement is reached for the settlement of the claim; and

(c) the sole purpose of proceedings is to obtain the approval of the court to a settlement or compromise of the claim,

the claim must –

(i) be made using the procedure set out in Part 8 (alternative procedure for claims); and

(ii) include a request to the court for approval of the settlement or compromise.

(3) In proceedings to which Section II or Section III of Part 45 applies, the court will not make an order for detailed assessment
of the costs payable to the child or protected party but will assess the costs in the manner set out in that Section.

(Rule 46.4 contains provisions about costs where money is payable to a child or protected party.)

Written by kerryunderwood

November 3, 2021 at 10:40 am

Posted in Uncategorized

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