Kerry Underwood

TIME OR KNOWLEDGE? WHAT ARE WE PAID FOR?

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This piece first appeared in my twice weekly Newsletter – Kerry On Costs… And So Much More…

Subscription for 2023 for approximately 100 Issues is £500 plus VAT can be booked here.

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It is the classic conundrum that I pose in my lectures.


A solicitor rings a barrister at 2pm with a query, and the barrister does not know the answer and says she/he will look it up. She/he takes one hour to do so, and then telephones the solicitor with the answer and charges £200.


By coincidence, as the barrister puts the phone down, another solicitor rings with the same query.


Does the barrister:

  • give the answer there and then, and tell the solicitor that it is not worth preparing a fee note;
  • tell the solicitor that she/he will research the matter and get back and then subsequently telephone and charge £200 for the advice; or
  • tell the solicitor that she/he knows the answer and the fee will be £250, the rationale for the higher fee being that she/he is now a better lawyer than she/he was an hour ago, as she/he knows the point without the need to look it up.

In other words, are we being paid for time or knowledge?

Written by kerryunderwood

January 27, 2023 at 10:09 am

Posted in Uncategorized

FINANCIAL CONDUCT AUTHORITY SLAMS CLAIMS MANAGEMENT COMPANIES

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This piece first appeared in my twice weekly Newsletter – Kerry On Costs… And So Much More…

Subscription for 2023 for approximately 100 Issues is £500 plus VAT can be booked here.

This includes free access to all of my Zoominars, together with a recording, and 10% off any live courses.

In a letter to Claims Management Companies, the Financial Conduct Authority states that while it has seen improvements in some areas, there remains a risk to consumers using such organisations.


The Authority’s Consumer Finance Director Roma Pearson said that advertising can be ‘misleading, unclear and unfair’ and clients misled by poor-quality promotions.


Examples included poor or no disclosure on company websites, search engine advertising and social media posts about the status of the Claims Management Companies, what fees it charges and complaints procedures.


Claims Management Companies were also said to be using Financial Conduct Authority authorisation to legitimise their non-regulated services and are not being clear about which products and services are regulated.


The Financial Conduct Authority is concerned about what it called the ‘inappropriate sourcing of customers’, where Claims Management Companies do not always conduct or document appropriate checks when buying customer data or leads, or do not ensure that a potential client has been sourced lawfully.


Claims Management Companies are then failing to investigate the merits of each element of a potential claim, and potentially failing to meet Financial Conduct Authority requirements to ensure that claims are not false or misleading or an exaggeration, the letter warned. It said some companies still exhibit a ‘poor attitude to regulatory obligations’ where they do not take a proactive approach and do not deal with their regulator in an open and cooperative way.


‘We will identify Claims Management Companies that appear to cause harm, work with our regulatory family and other external partners to identify issues and take action against firms that are causing harm.’


Ms Pearson added that companies will be expected to show they are protecting clients and in particular not putting ‘their own profits and income above consumers’ interests and fair treatment’.


Since the Financial Conduct Authority took on responsibility for the regulation of Claims Management Companies in 2019, 30% of businesses have left the sector because they were unable to meet the new standards.


The regulator has introduced a fee cap on Claims Management Companies charges and banned companies ‘phoenixing’ so that individuals responsible for failings cannot set up new entities.


60 firms have been banned or been issued with conditions on their authorisation.


COMMENT


Well, there is a thing!


Set up a cowboy system of non-lawyers, and then complain that it is a cowboy system.


Ban the lot.


How about having some sort of highly qualified, fully insured, heavily regulated people doing this?


Need to think of a name – maybe solicitors, lawyers, legal executives – something like that.

Written by kerryunderwood

January 26, 2023 at 10:58 am

Posted in Uncategorized

DYSFUNCTIONAL COSTS SYSTEM: 97 DAY ASSESSMENT – OR WAS IT 104 DAYS? COURT LOSES COUNT

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This piece first appeared in my twice weekly Newsletter – Kerry On Costs… And So Much More…

Subscription for 2023 for approximately 100 Issues is £500 plus VAT can be booked here.

This includes free access to all of my Zoominars, together with a recording, and 10% off any live courses.

In

Deutsche Bank AG v Sebastian Holdings Inc [2023] EWHC 9 (SCCO)


there is no new law, but it is worth reading this short Judgment to see how our costs system is now beyond parody.

A longer read, or re-read is Bleak House by Charles Dickens, but after reading this Judgment you might wonder what Mr Dickens was moaning about.

Detailed assessment proceedings started in 2017 and the bill was served on 25 January 2019 and Points of Dispute in July 2019 and Replies in December 2019.

The detailed assessment hearing commenced in February 2020 and concluded with this Judgment on 23 December 2022, and there were 97 hearing days, and as the Senior Costs Judge pointed out, that was over twice as long as the actual trial.

Indeed the case took so long that the court was not sure how many days it took and in a footnote at paragraph 23 of the Judgment, the court suggested that it might have been 104 days, but no one could be sure whether this included days which have been listed but not used.

Ultimately, the costs awarded were “only” £2 million more than the payment on account made nearly nine years earlier in 2014.

The Senior Costs Judge here said: –

”Apart from the size of the bill and the length of the detailed assessment, this case was, procedurally, straightforward.”

COMMENT

This madness must stop.

No detailed assessment should last more than five days, and even that should be extremely rare.

Any detailed assessment lasting more than one day should be vigorously time tabled and, as in council chambers up and down the country, and indeed in other courts, at the end of the allotted period, that is that, and the judge decides any unaddressed matters on the papers.

COSTS REDUCED BY 98.5%

In

AB v Secretary of State for Justice [2023] EWHC 72 (KB)

the costs claimed by the partially successful Applicant were reduced by 98.5%.

The initial bill was reduced by 95%, because it was too high, and the remaining 5% was reduced by a further 70% to reflect the Applicant’s misconduct in the proceedings.

The Applicant, who was subject to an anonymity order, is a solicitor advocate acting on his own behalf, and he is based in Liverpool, but we know no more.

There is no new law here, but if you can be bothered to read the Judgment, it is another example of the entirely dysfunctional costs system in this country.

Written by kerryunderwood

January 25, 2023 at 9:14 am

Posted in Uncategorized

COSTS PROTECTION FOR REGULATORY BODIES

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This piece first appeared in my twice weekly Newsletter – Kerry On Costs… And So Much More…

Subscription for 2023 for approximately 100 Issues is £500 plus VAT can be booked here.

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In


A & D Computers Ltd v Nottingham County Council [2022] EWHC 2922 (Admin)


the Administrative Court, part of the Kings Bench Division of the High Court, held that a Magistrates’ Court had been wrong to refuse to make a Costs Order against a local authority.


Here, the local authority’s complaint against A & D Computers Ltd was brought under Section 97 of the Trade Marks Act 1994 and was dismissed by the District Judge as the local authority was unable to present its case at the hearing.


The District Judge, applying


Bradford MDC v Booth [2000] 5 WLUK 236


held that as the local authority had acted reasonably and properly in bringing the proceedings, the Court should not make an order against it, despite the discretion to do so provided by Section 64(1)(b) of the Magistrates’ Courts Act 1980.


The Administrative Court overturned that finding, holding that forfeiture proceedings under the Trade Marks Act 1994 should be classed as civil proceedings and not regulatory proceedings.


Accordingly, the case of Booth had no application and the District Judge had erred in law in refusing to award the company its costs of defending the action.


Although the District Judge had had regard to the decision to institute the proceedings as a factor in the exercise of his discretion to refuse an award of costs, he had failed to have regard to how the local authority had conducted the proceedings following commencement.


The failure of the prosecution was due to the local authority failing to instruct counsel and failing to ensure that its own complaint was ready to be tried.


That had nothing to do with the exercise by the local authority of any of its statutory duties.


The District Judge’s decision not to award costs involved a misdirection of law in wrongly taking Booth into account, and it exceeded the ambit of his discretion by failing to have regard to the manner in which the local authority had conducted the proceedings.


The decision was quashed and remitted to the District Judge.


COMMENT


This decision raises more questions than it answers.


If the proceedings had in fact been regulatory, and not civil, should the Court have ordered costs anyway, as the reason for the failure of the action was failure to be represented at the hearing, as set out above, and not the reasonableness or otherwise of the decision to bring the action in the first place?


If the proceedings had not been conducted unreasonably, should the Court in any event have awarded costs, because the proceedings were civil and not regulatory?


Is it necessary for the proceedings to be both non-regulatory and poorly conducted to warrant an award of costs?

In any event, why should regulatory bodies such as local authorities and the Solicitors Regulation Authority, both powerful and well-funded, enjoy this form of One-Way Costs Protection against individuals and companies?


Guidance was set out in the Booth case as follows:


“16. In City of Bradford Metropolitan District Council v Eric Wilson Booth [2000] 164 JP 485, Lord Bingham CJ summarised (at paras 24ff) the proper approach to the application of section 64 in three propositions:


“1. Section 64(1) confers a discretion upon a Magistrates’ Court to make such order as to costs as it thinks just and reasonable. That provision applies both to the quantum of the costs (if any) to be paid, but also as to the party (if any) which should pay them.

2. What the court will think just and reasonable will depend on all the relevant facts and circumstances of the case before the court. The court may think it just and reasonable that costs should follow the event, but need not think so in all cases covered by the subsection.

3. Where a complainant has successfully challenged before justices an administrative decision made by a police or regulatory authority acting honestly, reasonably, properly and on grounds that reasonably appeared to be sound, in exercise of its public duty, the court should consider, in addition to any other relevant fact or circumstances, both (i) the financial prejudice to the particular complainant in the particular circumstances if an order for costs is not made in his favour; and (ii) the need to encourage public authorities to make and stand by honest, reasonable and apparently sound administrative decisions made in the public interest without fear of exposure to undue financial prejudice if the decision is successfully challenged.”


It is time this whole area was revisited.


The policy is grossly unfair.

Written by kerryunderwood

January 24, 2023 at 1:27 pm

Posted in Uncategorized

ILLEGAL REFERRAL FEES: A REMINDER OF THE LAW

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This piece first appeared in my twice weekly Newsletter – Kerry On Costs… And So Much More…

Subscription for 2023 for approximately 100 Issues is £500 plus VAT can be booked here.

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It is apparent that many Personal Injury solicitors are openly breaking the law in relation to referral fees, whilst others are turning a blind eye, and yet others have convinced themselves that the complexity and lack of transparency of their arrangements means it is all okay.

It is not.

Here is a reminder of the law in this area, which is likely to come under increasing scrutiny in 2023.

I start by setting out in full Section 56 of the Legal Aid, Sentencing and Punishment of Offences Act 2012. 

“56. Rules against referral fees

(1) A regulated person is in breach of this section if—

(a) the regulated person refers prescribed legal business to another person and is paid or has been paid for the referral, or

(b) prescribed legal business is referred to the regulated person, and the regulated person pays or has paid for the referral.

(2) A regulated person is also in breach of this section if in providing legal services in the course of prescribed legal business the regulated person—

(a) arranges for another person to provide services to the client, and

(b) is paid or has been paid for making the arrangement.

(3) Section 59 defines “regulated person”.

(4) “Prescribed legal business” means business that involves the provision of legal services to a client, where—

(a)  the legal services relate to a claim or potential claim for damages for personal injury or death,

(b) the legal services relate to any other claim or potential claim for damages arising out of circumstances involving personal injury or death, or

(c) the business is of a description specified in regulations made by the Lord Chancellor.

(5) There is a referral of prescribed legal business if—

(a) a person provides information to another,

(b) it is information that a provider of legal services would need to make an offer to the client to provide relevant services, and

(c) the person providing the information is not the client;

and “relevant services” means any of the legal services that the business involves.

(6) “Legal services” means services provided by a person which consist of or include legal activities (within the meaning of the Legal Services Act 2007) carried on by or on behalf of that person; and a provider of legal services is a person authorised to carry on a reserved legal activity within the meaning of that Act.

(7) “Client”—

(a) where subsection (4)(a) applies, means the person who makes or would make the claim;

(b) where subsection (4)(c) applies, has the meaning given by the regulations.

(8) Payment includes any form of consideration whether any benefit is received by the regulated person or by a third party (but does not include the provision of hospitality that is reasonable in the circumstances).”

Firstly, and most importantly, the point to note is that throughout the section the reference is to “the regulated person” or “a person”.

Any talk of the corporate veil etc. is meaningless. The individual is liable. The status of the offence under the Act is unclear, and I look at that later, but there is no doubt at all that it creates a liability on an individual, whatever the nature of the entity.

If a regulated person receives any form of consideration, or any third party receives any form of benefit – see Section 56(8) – then that is a breach, save that the provision of reasonable hospitality does not amount to a payment.

If a telephone call is simply transferred to the firm then there is not a referral of prescribed legal business within the meaning of Section 56(5), as no information is being provided, and so no offence is committed.

There are four requirements under Section 56(5), and Section 56(5)(c) provides that if the person providing the information is not the client, then clearly that condition is satisfied, and ‘’relevant services’’ means any of the legal services that the business involves, and so that is satisfied.

However, if no information is provided then there is no breach.

Consequently, if a marketing organisation simply transfers the call to a law firm, then there is no breach.

I am less happy about a system where a firm accesses a password protected portal to obtain information; my view is that a firm cannot avoid the consequences of Section 56(5) by simply having the referrer place the information on a portal, which the firm then accesses.

You do not need to be a genius to work out that if everything is above board, then you simply obtain all the information from the client, as happens in other types of work, and without recourse to any portal.

The only reason for using the portal is so that the referrer can trace that your firm has got the client through them.

Properly dealt with, there is no problem in paying a digital marketing agency a fee for marketing personal injury services.

What must be carefully noted is Section 56(2) which, for ease of reference, I repeat:

56. Rules against referral fees

(2) A regulated person is also in breach of this section if in providing legal services in the course of prescribed legal business the regulated person—

(a) arranges for another person to provide services to the client, and

(b) is paid or has been paid for making the arrangement.”

That involves a breach of Section 56 if any non-legal service is provided to the client by another person, and the regulated person is paid, or has been paid, for making the arrangement.

The subsection is clear and involves the regulated person providing legal services in the course of prescribed legal business, but the breach occurs if another person provides any services to the client and the regulated person is paid, or has been paid, for making the arrangements.

That clearly, and deliberately, avoids the receipt by a regulated person of any money of any kind in return for arranging another person to provide any services to the client, and that very clearly and obviously includes the provision of, for example, medical reports.

It could not be clearer.

Section 56(8) defines payment as including any form of consideration whether any benefit is received by the regulated person, that is the law firm, or by a third party, for example a sister company, or indeed an unassociated company.

If this only related to legal business, then Section 56(2) would be unnecessary, as receipt of money, or payment of money, for legal business is covered by Section 56(1).

Not only is Section 56(2) freestanding, but it includes the word “also” which clearly involves a separate and discrete breach of the Act.

Note that Section 56(2) does not require the passing of any information for there to be a breach of the Act; it is only Section 56(5) where the term “information” appears.

Section 59 defines a regulated person, and includes an authorised person within the meaning of the Financial Services and Markets Act 2000, a person authorised under Section 5(1)(a) of the Compensation Act 2006 to provide regulated claims management services – that is a claims management company individual – and a person authorised by the Law Society to carry on reserved legal activity within the meaning of the Legal Services Act 2007.

It is true that Section 56 imposes no criminal sanction, and therefore it is arguable that it does not create a criminal offence.

However, we all know that there is no such thing as a civil offence, and there is a powerful argument that it does create a criminal offence, but without penalty.

In any event, a breach by a solicitor of an Act of Parliament, whether that Act imposes a criminal sanction or not, is very obviously a most serious matter, and repeated breach would warrant the solicitor being struck off.

There is a prohibition on a regulated person providing legal services through an unauthorised body, but there is no prohibition on a regulated person providing non-legal services through the medium of an SRA-recognized and regulated body.

That is made clear by Section 56(6) of the Act which states that “legal services” means services provided by a person which consist of or include legal activities (within the meaning of the Legal Services Act 2007) carried on by or on behalf of that person, and that a provider of legal services is a person authorised to carry on a reserved legal activity within the meaning of that Act.

As the cesspit that is residential conveyancing comes under increased scrutiny – a ban on bungs to estate agents is long, long overdue – expect the whole issue of referral fees – bribes – to come up.

You have been warned.

Written by kerryunderwood

January 23, 2023 at 12:30 pm

Posted in Uncategorized

FAIR DEALINGS IN PERSONAL INJURY CLAIMS BILL

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This piece first appeared in my twice weekly Newsletter – Kerry On Costs … And So Much More …

Subscription for 2023 for approximately 100 Issues is £500 plus VAT can be booked here.

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Here are some ideas for cleaning up personal injury work and I have put them in the form of a draft Bill.

Any other ideas?

1.It shall be an offence, punishable by up to two years imprisonment, for an insurance company to seek to settle a personal injury claim with its insured’s opponent direct, save as provided for by Section 2.

2.If a potential claimant enters a matter on the portal as a Litigant in Person, then Section 1 shall not apply.

3.It shall be an offence, punishable by up to two years imprisonment for a solicitor to act for a client with Before-the-Event insurance where that solicitor knows, or should reasonably have known, that that client has been deprived of freedom of choice of solicitor by that BTE insurance company.

4.It shall be an offence, punishable by up to two years imprisonment for a BTE insurer to seek to persuade its insured to go to a solicitor of the BTE insurance company’s choice.

5.It shall be an offence, punishable by up to two years imprisonment for a solicitor to place a matter on the portal without written instructions so to do from the claimant.

6.A representative who does not meet with a client shall not be able to recover costs. “Meet with” includes meeting by way of any video application such as Teams, Zoom or Whatsapp.

7.A solicitor paying a referral fee in a personal injury case shall be struck off the Roll and be subject to imprisonment for up to two years.

8.Any person who knowingly presents false information in any Parliamentary consultation shall be guilty of an offence punishable by up to two years imprisonment.

9.No person, company or body of any kind which deals with personal injury work shall make a donation to any political party, or associated body, which exceeds £5,000.00 a year and anyone who does so shall be guilty of an offence punishable by up to five years imprisonment.

10.If a defendant in a personal injury claim alleges fundamental dishonesty or fraud and fails at trial to substantiate that allegation then the court shall increase general damages by 100% and shall award the claimant costs on the indemnity basis and shall increase those costs by 100%.

Written by kerryunderwood

January 20, 2023 at 12:31 pm

Posted in Uncategorized

INSURERS CRUSHED AGAIN ON PART 36 AND QOCS SET OFF: HAPPY NEW YEAR!

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This piece first appeared in my twice weekly Newsletter – Kerry On Costs … And So Much More …

I attach some examples of the Newsletter –

Issue 49

Issue 90  

Issue 91

Subscription for 2023 for approximately 100 Issues is £500 plus VAT can be booked here.

This includes free access to all of my Zoominars, together with a recording, and 10% off any live courses.

In

Chappell v Mrozek [2022] EWHC 3147 (KB)

the Kings Bench Division of the High Court rejected the Defendant insurer’s attempt to circumvent QOCS in yet another Part 36 late acceptance case and yet another failed attempt by insurers to subvert the decisions of the Supreme Court in

Ho v Adelekun [2021] UKSC 43

and the Court of Appeal in

Cartwright v Venduct Engineering Limited [2018] EWCA Civ 1654

As I write elsewhere in this Issue, my strong advice to Claimants’ solicitors when met by this tactic is to make an application against the Defendant’s solicitor personally for a Wasted Costs Order under Section 51 of the Senior Courts Act 1981, which if upheld, forces the Court to consider reporting that solicitor to the Solicitors Regulation Authority.


Likewise  Defence Counsel, and the Court must consider referring them to The Bar’s regulatory body.

Such conduct is entirely unacceptable, as made clear by the Court here, and in other cases.

Here, the Claimant accepted a Part 36 offer of £250,000 around 20-months after it had expired.

The insurer deliberately refused to pay the damages, in breach of the Civil Procedure Rules, forcing the Claimant to apply to Court for an Order for Payment so that it could then argue that an order had been made for damages and interest, thus triggering the loss of QOCS Protection.

The Court said: –

“It cannot be fair or right that a paying party is financially rewarded (by securing an order for damages and interest) against which it can enforce costs orders, only through the deliberate breach of an obligation imposed by the CPR to pay an agreed sum.

I consider it important to recognise the unfairness to the claimant, and those trying to advise him as well, if my finding was against him… the defendant confirmed that they accepted the claimant’s suggested costs liability so the only issue was the QOCS set-off. The defendant’s decision to challenge the position judicially has resulted in the claimant being denied any payment of his agreed damages to date. That is unfortunate and [there is] case authority for the proposition that the claimant is entitled to receive the offered sum without awaiting set-off of an unquantified costs liability.”

COMMENT

This behaviour by Defendant insurers must be stopped. It is disgraceful.

Written by kerryunderwood

December 23, 2022 at 1:51 pm

Posted in Uncategorized

APPEAL IN INTERLOCUTORY POINT: LOSER PAYS: COSTS NOT IN THE CASE

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This piece first appeared in my twice weekly Newsletter – Kerry On Costs … And So Much More …

I attach some examples of the Newsletter –

Issue 49

Issue 90  

Issue 91

Subscription for 2023 for approximately 100 Issues is £500 plus VAT can be booked here.

This includes free access to all of my Zoominars, together with a recording, and 10% off any live courses.

In

Frasers Group Plc v The Official Receiver & Ors [2022] EWHC 3184 (Ch)

the Chancery Division of the High Court held that the appropriate order, following a successful appeal in relation to an interlocutory matter was that the unsuccessful respondents to the appeal should pay costs, and that those costs should not be deferred until after the trial of the substantive action, and the Court ordered detailed assessment.


The Court was concerned about the amount of costs involved and only allowed less than one third of the sum being claimed in relation to the interim payment on account of costs.


£75,000 was ordered, compared with the sum of £324,000 which was claimed.

Thus, the Court rejected the paying party’s mission that the costs of the appeal should be reserved, on the basis that a fair decision as to the costs of the appeal could only be made at the end of the trial of the substantive issue.


“The appeal was a distinct interlocutory step in the proceedings. The appeal has had a clear outcome; Frasers has succeeded and Silver and GLAS have failed. It is usual for the court to deal with the costs of distinct interlocutory steps as it goes along rather than reserving those costs. It is not unfair to decide the question as to the costs of the appeal irrespective of knowing the outcome of Frasers’ contentions following a trial. The present case is not comparable to the case of a split trial where, following a trial on liability and before a trial on quantum, it is sometimes right to reserve the costs of the trial on liability. Nor am I assisted by being shown one example of a case where summary judgment was refused and the judge reserved the costs. Instead, I will follow the completely usual practice of dealing with the costs of interlocutory applications or interlocutory appeals by reference to success and failure on the application or the appeal.”


COMMENT

This is a similar approach to another case reported by me, under the heading: –


COSTS AND CASE MANAGEMENT CONFERENCES: COSTS WILL NOT ALWAYS BE COSTS IN THE CASE

Written by kerryunderwood

December 22, 2022 at 4:07 pm

Posted in Uncategorized

COSTS AND CASE MANAGEMENT CONFERENCES: COSTS WILL NOT ALWAYS BE COSTS IN THE CASE

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This piece first appeared in my twice weekly Newsletter – Kerry On Costs … And So Much More …

I attach some examples of the Newsletter –

Issue 49

Issue 90  

Issue 91

Subscription for 2023 for approximately 100 Issues is £500 plus VAT can be booked here.

This includes free access to all of my Zoominars, together with a recording, and 10% off any live courses.

In


University of Manchester v John McAslan & Partners Ltd & Anor [2022] EWHC 3154 (TCC)


the Technology and Construction Court of the Business and Property Courts of England and Wales, part of the Kings Bench Division of the High Court, ordered one of the Defendants in the action to pay the Claimant’s costs of a specific issue raised by that Defendant at the Costs and Case Management Conference.


This is contrast to the usual position where the costs for Costs and Case Management Conference are costs in the case, that is the ultimate winner gets the costs of that hearing.


Indeed, the Court here said that the default position in accordance with the practice of this Court is that the Order for Costs should be costs in the case.


The issue in dispute here concerned expert evidence and the Second Defendant accused the claimant of “expert shopping”, an allegation which the judge firmly rejected, and the judge also held that the disclosure made by the Claimant’s solicitors was sufficient and appropriate to satisfy the requirements set out in the authorities when a party wishes to change expert.


There had been correspondence between the parties after that disclosure, and a substantial amount of documentary evidence was placed before the judge, and the judge heard lengthy oral submissions on the matter.


The Court held:


“13. In my judgment this is a case where there should be a departure from what I have described as the default position insofar as costs which would not otherwise have been incurred in respect of the Costs and Case Management Conference were incurred after 13 September 2022 in dealing with the Second Defendant’s submission that conditions should be attached to the permission for the Claimant to adduce expert evidence.

14. The assessment of those costs cannot be made at this stage: what is necessary is to determine the costs which would have been incurred in any event in preparing for and attending the Costs and Case Management Conference and the additional costs incurred after 13 September 2022 in dealing with the Second Defendant’s submission that conditions should be attached to the permission for the Claimant to adduce expert evidence.

15. Accordingly I decline to order summary assessment or an order for payment of costs on account, but I do order that the Second Defendant should pay the Claimant’s costs incurred after 13 September 2022 in dealing with the Second Defendant’s submission that conditions should be attached to the permission for the Claimant to adduce expert evidence.”

COMMENT

This is a reminder that the discretion of the Courts in relation to costs is very wide indeed but raising duff points at a Costs and Case Management Conference can, rightly, lead to punishment in costs, whatever the odds and outcome of a case.


This is a similar approach to that adopted by the Chancery Division in relation to costs of an appeal on an interlocutory point, which I have written up under: –


APPEAL IN INTERLOCUTORY POINT: LOSER PAYS: COSTS NOT IN THE CASE

Written by kerryunderwood

December 22, 2022 at 3:55 pm

Posted in Uncategorized

SOLICITORS ACT 1974: TIME LIMITS: PAYMENT BY DEDUCTION

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This piece first appeared in my twice weekly Newsletter – Kerry On Costs … And So Much More …

I attach some examples of the Newsletter –

Issue 49

Issue 90  

Issue 91

Subscription for 2023 for approximately 100 Issues is £500 plus VAT and can be booked here.

This includes free access to all of my Zoominars, together with a recording, and 10% off any live courses.

In


Menzies v Oakwood Solicitors Ltd [2022] EWHC 3199 (KB)


the Kings Bench Division of the High Court, on appeal, overturned the decision of a Costs Judge who had held that an application for detailed assessment of a solicitor’s bill by a former Client was time-barred as it had been made more than a year after the costs have been paid, and thus, fell foul of the time limits in Section 70(4) of the Solicitors Act 1974.


Here, the solicitors had deducted the costs from damages received from the other side in a personal injury claim.


The High Court held that the solicitor had not presented an appropriate settlement account to the Claimant, and therefore, time had not begin to run.


It is well established that mere acquiescence by a Client to a deduction of costs from damages does not amount to payment of the bill by the client for the purposes of the Solicitors Act 1974.


Rather, positive and specific consent to the deduction is required to start time running.


As in all such cases, the decision was fact sensitive: –


“On the facts of this case, I therefore conclude that the Respondent did not inform the Appellant with sufficient clarity that he could object to the deduction with a reasonable time, failing which it would be taken to be agreed subject to his statutory assessment rights.”


Here, the Client had accepted an offer to settle the claim for £275,000 plus reasonable costs, and an interim statutory bill was delivered for £73,700, of which £38,000 was recovered from the other side.


The solicitors retained around £58,000 to cover any shortfall in costs, and ended up deducting around £35,000, and paying the remainder to the Client.


In evidence, and it is significant that the Client here did give evidence, in contrast to most such cases, Mr Menzies said that he was confused about the basis of the payment and had trusted his solicitors to work out the figures correctly.


He said that there was no sufficient informed agreement with the solicitors for the deductions to take place, but rather there was a general agreement that payment would be made from the monies held by the firm and would not exceed 25% of the damages.


The firm responded that there was an agreement for a capped payment by deduction, and that the final bill was sufficient to effect the necessary settlement of account.


The Court found that payment of the bill by deduction from the monies received from damages had been authorized in principle in the Conditional Fee Agreement, but the firm should have obtained the Client’s agreement to payment of the actual shortfall in order to demonstrate that the account had been settled.

Settlement of account could not be held to have occurred had the Client objected to deduction of that sum.


The High Court considered the case law dating back Re Ingle (1855) 25 L.J.CH 169 where it was held that payment of costs from monies retained must occur by agreement and “on the settlement of account between [the Client] and his solicitor”.


Here, the High Court held that there was no settlement of account, as compared with a mere account which was the account stated by the solicitor in the Final Statutory Bill and covering letter.


“36. Payment by retention of money from damages had been authorised in principle by the CFA. The Respondent now needed to obtain the Appellant’s agreement to payment of the actual shortfall of £35,711.20 in order to demonstrate that the account was settled. If the Appellant had objected to that sum, settlement of account could not have been said to have occurred.

37. In that situation, I do not consider that the client could prevent payment from occurring simply by ignoring the Respondent’s bill and letter. It must in my judgment be possible for a solicitor to give a client a reasonable time in which to notify any dispute, after which agreement can be assumed if there is no reply.

38. The problem in this case is with the terms in which the solicitor expressed the position. In his letter of 11 July 2019 Mr Shemwell said:

“If you wish to challenge the deduction sought from your damages in relation to costs, you have 30 days from receipt of this letter to file your complaint. A copy of our Complaints Procedure is available upon request. You have the right to have your charges reviewed by the Court. This is called “assessment”. The procedure is set out in s.70, 71 and 72 of the Solicitors Act 1974.”

39. That paragraph did not clearly identify that the Appellant had a choice between (1) declining to agree the deduction, in which case the Respondent might apply for its own bill to be assessed, and (2) agreeing to the deduction, in which case the Appellant could still apply for assessment of the bill if he wished.

40. On the contrary, the letter introduced the separate topic of the Respondent’s complaints procedure. It stated or at least implied that the Appellant could not challenge the deduction without resorting to that procedure, which was contained in an external document not in the Appellant’s possession. The paragraph also appeared to elide that process with the option of assessment under the 1974 Act, not making clear that the two were separate.

41. On the facts of this case, I therefore conclude that the Respondent did not inform the Appellant with sufficient clarity that he could object to the deduction with a reasonable time, failing which it would be taken to be agreed subject to his statutory assessment rights.”

The Court chose not to deal with an issue that has arisen before, but never been determined, on a particular time point.


It is well established that delivery of a Final Statutory Bill after deduction cures any issue surrounding that deduction, and the court here said that it was not a concern for the purposes of the time limits with the Solicitors Accounts Rules and Solicitors Code of Conduct.


The time issue is from what date time should run where there is a deduction subsequently ratified by a Final Statutory Bill and sufficient consent from the Client for it to amount to payment.

Does time run from the date of the original deduction, or the delivery of the Final Statute Bill?


The Court said that it would make practical sense for it to run from the date of the delivery of the bill but said that that did not sit easily with the wording of Section 70.


The Court declined to decide the issue, but had this to say: –


“32. The problem is not that the retention of £35,711.20 pre-dated delivery of the Final Statute Bill. Applying Re Thompson, payment could be followed by delivery of a bill to which it could be referred. Mr Ralph suggested that in those circumstances it would be logical for the time limits to run from delivery of the bill rather than from the date on which the solicitors took payment. That would make practical sense although it sits uneasily with the wording of section 70. In my judgment the authorities do not clearly answer that question and it does not fall for decision in the present case.”


COMMENT


It is always sensible to obtain the Client’s specific written authority for the actual deduction, and I have precedent letters in my Documents, Videos, Agreements, and Advices Menu.


There is a potential problem if the Client refuses positively to consent, in that although the deduction can be made, the Client can then challenge that deduction and is not bound by the one-month rule.


However, if the positive consent is tied up with the payment of the damages to the Client, the Client will normally consent so as to receive the damages.

Written by kerryunderwood

December 22, 2022 at 11:53 am

Posted in Uncategorized

PART 36 AND LATE ACCEPTANCE: CLEAR GUIDANCE NEEDED FROM COURT OF APPEAL

with 4 comments


The Court of Appeal has reserved its decision in an important case considering the curious state of the law in relation to Part 36 and late acceptance.


This was a clinical negligence case where the Claimant had sought £5.7 million, but after two years of litigation, and following a mediation, accepted a Part 36 offer of £421,362.88 made two years before.


The Defendant said that it had incurred £115,000 of costs since the time for accepting the Part 36 offer had expired.


As this was a Personal Injury claim, the Claimant enjoyed the benefit of Qualified One-Way Costs Shifting, which means that a costs order is made in the usual way, but there are heavy restrictions on the Defendant’s ability to enforce such an order.


Thus, the High Court ordered the Claimant to pay the post Part 36 expiry costs but stated that “the defendant may not set off or enforce this costs order against the claimant pursuant to rule 44.14”, that is CPR 44.14.


The effect of this is that the Claimant did not have to pay any of the Defendant’s costs, but of course, did not recover her costs for the post Part 36 expiry period.


Had the matter gone to trial, then the Defendant could have set off those costs against damages, up to the total awarded to the Claimant, thus, potentially wiping out the award, but not leaving the Claimant in debt to the Defendant.


The High Court Judge described this as “extremely regrettable” and said that it clashed with the policy aims of Part 36 to encourage early settlement but said that this was “the inevitable consequence of the authorities that bind me”.


The Court of Appeal has reserved judgment, which suggests that it might be considering overturning its own decision in


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


which the High Court Judge here was obliged to follow.


The Court of Appeal is not bound by its own previous decisions, and so is free to depart from its own previous ruling.


Before it does so, it should remind itself that there are very much two sides to this coin, as a late accepting Defendant suffers no penalty either.


Neither side gets the benefit unless the matter goes to trial, which is indeed counter-intuitive to the whole purpose of Part 36, which is to encourage early settlement.


The decision in Cartwright is widely thought to have been a response to the earlier decision in


Hislop v Perde [2018] EWCA Civ 1726


where the court held that a late accepting Defendant did not have to pay indemnity costs from the date of expiry of the time for accepting the Part 36 offer.


Either both decisions should be overturned – arguably the sensible outcome – or neither should be.

The problem with overturning these decisions is that it is effectively retrospective law in that parties, both claimants and defendants in Personal Injury cases, have felt free not to accept a Part 36 offer in time in the knowledge that there will be no penalty on late acceptance.


True it is that the concept of a Court declaring the law to be otherwise than it was before is always in a sense retrospective, but the difference here is that it affects ongoing cases and will affect costs covering many years in many cases.


It is also important to note that these are not issues where parties and the legal profession generally were awaiting authoritative decisions from the higher courts, but rather where there are what we thought were definitive decisions of the Court of Appeal.


Generally, the Supreme Court will not get involved in costs matters, although it did in


Ho v Adelekun [2021] UKSC 43 (06 October 2021)


and therefore, for all intents and purposes, Cartwright and Hislop decisions were final and authoritative decisions in this area.


Indeed, the Senior Judiciary have expressed their concern at the rules which made them make these decisions, and they are currently under review, and legislation is expected to overturn these decisions, but that legislation will not be retrospective; the danger here is that the Court of Appeal’s decision will be, in effect, retrospective.


Of course, the offeror, as here, always has the power to withdraw the offer.


This issue, no doubt fed by the insurers’ bottomless pit of public relations funding, has been reported as a one-way street. It most certainly is not.


That does not mean that the insurers are wrong, but it does mean that the commentary has been skewed, and here I am unskewing it.


The High Court correctly stated the existing law:


His Honour Judge Sephton KC said the case turned on the nature of the acceptance of a Part 36 offer, the acceptance of which he said is not “an order for damages or interest made in favour of the claimant”.


The Judge stated that the costs order could not be enforced because the Civil Procedure Rules provide for enforcement only after proceedings have concluded.


On acceptance of a Part 36 offer, proceedings are stayed and are not concluded.


Some solicitors for insurance companies are openly stating in correspondence that I have seen that late acceptance of a Part 36 offer by a Claimant triggers an enforceable costs order.


Not only is that wrong, but they must know that it is wrong.


Some solicitors are going even further and saying that they will not pay up on late acceptance of a Part 36 offer by a claimant, without a court order, and that such an order then means that costs can be enforced.


That is doubly misleading.


On acceptance of a Part 36 offer the paying party must pay up within 14 days.


No ifs, no buts.

If a paying party does not want that consequence, then it should withdraw the offer.


Furthermore, as the High Court Judge said in this case, acceptance of a Part 36 offer leads to proceedings being stayed, and not concluded.


In my view, any defendant who seeks to avoid the clear requirement that payment must be made within 14 days of a Part 36 offer being accepted, and that is one of the few areas where a Part 36 is clear and seeks to require the claimant to obtain a court order, in the hope that that triggers a costs liability, is guilty of contempt of court and should be punished accordingly.


Counsel for the insurers here said that the Lower Court decision meant that the Defendant would have been able to recover it costs only if it had taken the case to trial.


He said:


“If the dividing line is between settlements and trials, what is the logic of that dividing line? Why would Parliament have intended to distinguish those two? Your disincentive for making offers or accepting offers is, “we will not get our costs back”, which is a perverse incentive. If that dividing line is here, defendants are not encouraged to settle, they are encouraged to take things to trial.


As an anonymous commentator on the Law Society Gazette article said – and I wish I had your name to give you public credit:


“Mr Pot, may I introduce you to Mr Kettle?


This is the exact flaw that Defendants benefit from when the accept Claimant offers at the door to the court.”


Quite.


The whole stance of the Defendant here is very strange indeed.


They are clearly alleging fundamental dishonesty.


In response, the trust introduced evidence collected from social media and surveillance which it alleged showed “a gross lack of consistency such that the credibility of the claimant was undermined and the honesty of the claimant’s account was in issue”.


Now, I do not know when the incident occurred, but if it was after the implementation of the Criminal Justice and Courts Act 2015, then if fraudulent dishonesty is found, the Claimant is held to have lost the claim.


If it was before then, then the Claimant still loses costs protection under Qualified One-Way Costs Shifting, if fundamental dishonesty is found.


Why did the Defendant not withdraw his Part 36?


On the face of it, it looks as though the insurers had deliberately chosen to fight the Part 36 point on a case which, by any standards, does not reflect well on the Claimant.


Yet, on the face of it, the Defendant had its remedies elsewhere, as set out above.


In this Issue I also look at the decision in


Kerseviciene v Quadri & Anor [2022] EWHC 2951 (KB)


where the Court allowed the admission of evidence produced by a Defendant Insurer’s solicitor about the alleged pattern of conduct in cases where a particular firm of solicitors was representing the Claimant.

The Personal Injury market has been described as an open sewer.


Let us not forget that whatever the conduct of claimant solicitors and defendant solicitors, and let us be blunt, conduct of some solicitors on both the claimant and the defendant’s side is a disgrace to the legal profession, the reality is that thousands of people each year, through no fault of their own, suffer life changing injuries.


It is those people who have been under constant attack from all the main political parties, either by active legislation, or a failure to oppose repressive legislation.


We have the whiplash tariff and the Small Claims Portal, both of which disgrace a supposedly civilized country where the Rule of Law is supposed to rule supreme.


We have had Criminal Injuries Compensation, where a person is seriously injured by criminal behaviour, massively reducing cap.


Court fees are beyond the reach of ordinary people.


It is not a sin to be injured.


The atmosphere in the United Kingdom is becoming thoroughly toxic.


The Court of Appeal needs to think very carefully about this one, and to recognize the massive financial and political power enjoyed, and abused, by some insurance companies.


If I were the Court of Appeal, I would reverse both decisions, that is Cartwright and Broadhurst, but only prospectively, that is in relation to Part 36 offers made after the Court of Appeal gives its judgment.


Late Settlement Punished, Even Though It Beat Part 36 Offer: Carver Restored? Parliament Ignored?


The confusion of the courts was further demonstrated in the case of


Moradi v The Home Office (Costs) [2022] EWHC 3125 (KB) (05 December 2022)


where the High Court penalised a Claimant for late settlement, even where the settlement agreed on the last working day before trial was 50% more than the Part 36 offer made by the Defendant.


The Court was critical of the fact that the Claimant did not accept that Part 36 offer, even though it did 50% better on settlement, and made no counter-offer until nine months after that offer was made.


“The Claimant’s costs submissions do not explain why, having initially proposed settlement, she then did not pursue it for nine months. That fact is central to the costs issue in this case.”


The Claimant did then make a Part 36 offer in the sum of £40,000, which it revised downwards to £22,500, and then to £18,000, before finally accepting the Defendant’s Part 36 offer of £15,000, itself made just two working days before trial.


Here, the automatic costs consequences of Part 36 did not apply because the offer was made less than 21 days before the start of the trial, and therefore, comes within CPR 36.13(4)(a) which provides that costs must be determined by the court, unless the parties agree those costs.


The parties did not agree costs, and so here the Court was determining those costs.


What the Court did was to award the Claimant its reasonable costs in the usual way up to the 21 December 2021, which was the date of expiry of the Defendant’s Part 36 offer, which the Claimant bettered by 50% on settlement.

For the period after that the Court only awarded the Claimant 66% of its reasonable costs, or to put it another way, imposed a 34% penalty on the Claimant for settling shortly before trial.


This is not a case of late acceptance of a Part 36 offer, as the offer made by the Defendant, which was accepted, was only made two days before trial and a party always has at least 21 days to accept an offer.


The irony is that had this offer been made more than 21 days before trial, and the Claimant had accepted it, then the Court would have no discretion as the costs consequences are then automatic.


Thus, the Court only had the opportunity to punish the Claimant here because of the Defendant’s very late offer, which the Claimant accepted. This actually encourages paying parties to hold off making offers until within the 21-day period before trial, and rely on earlier, lower offers, again something which Part 36 specifically forbids if the second, higher offer is made more than 21 days before trial.


In those circumstances the Part 36 consequences run only from the second, more advantageous offer. It is only when the offer is lowered that costs consequences run from the first, higher, offer, as discussed at length by me in Issue 49, page 271


LOWERING PART 36 OFFERS


and Issue 86, pages 863-865


DEFENDANTS REDUCING PART 36 OFFERS AND CLAIMANTS INCREASING THEM


This make no sense at all and part of the reasoning, which to put it mildly is not lucid, appears to be that the Claimant has gone on for a long period after the Part 36 offer of £10,000 was made, with considerable costs incurred, and only achieved a further £5,000, albeit that that is 50% more than the original offer.


This decision seems perilously close to following a decision in


Carver v BAA Plc [2008] EWCA Civ 412 (22 April 2008)


which Parliament specifically overturned saying that there is a bright line and the fact the Claimant only just beats its offer by a pound or so, can never lead to the Claimant being punished in costs.


If it were otherwise, then there is total uncertainty on costs.


This is a wrong decision which should be overturned, and as I make clear in this whole piece, this whole issue needs very careful consideration.

Written by kerryunderwood

December 14, 2022 at 4:16 pm

Posted in Uncategorized

Administration Assistant Required

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Quality without compromise

Administration Assistant

A fantastic opportunity has arisen for a candidate to start a career in legal administration which could lead on to legal work and a formal qualification. Operating for over 30 years, Underwoods Solicitors is a very well-established local firm with a worldwide reputation and totally committed to modern ways of working and assisting clients.

The Role

The key responsibilities for this role are:

  • Providing administrative support to the lawyers
  • Answering the telephone
  • Opening and closing e-files and physical files
  • E-filing and physical filing
  • Updating and maintaining databases
  • Liaising with clients and other professionals
  • Greeting clients
  • Managing post
  • Scanning documents and files
  • Ordering stationery
  • Monitor and maintain office supplies
  • General administrative duties

Who are we looking for?

We are looking for a smart, well presented and hardworking individual. Our key requirements are:

  • Excellent administrative and organisational skills
  • Excellent telephone manner
  • Highly computer literate
  • Clear written and oral communication skills
  • Strong team player 
  • Ability to deliver exceptional client care standards to everyone
  • Ability to work under pressure and prioritise tasks
  • A keen interest in law related matters

This is a fantastic opportunity to join a prestigious, innovative and well-respected firm. This position would be ideal for a candidate looking to embark on a full-time career in law. If the candidate has a strong interest in law, there could be an opportunity through the Chartered Institute of Legal Executives to gain a qualified legal position.

Hours

Core hours 8.30am to 5.00pm Monday to Friday and due to the nature of this role, this would be a full-time office-based position.

Salary

£18,000+ according to experience

Added extras and benefits

  • 20 days holiday per annum rising by one day in the holiday year following the first year of service and by each subsequent holiday year by one further day to a maximum of 25 days.
  • An additional day’s holiday for your birthday
  • Free onsite parking
  • Free hot drinks and a variety of soft drinks plus biscuits
  • Family friendly firm that supports working parents
  • Healthy approach to work/life balance
  • Opportunities to attend and support legal events and local, regional, and national sporting and charity events
  • You will be invited to celebrate and take part in the firm’s 30th birthday celebrations which were put on hold due to Covid.  
  • Opportunity to visit South Africa

About us

We are an independent law firm with offices in Bovingdon in Hertfordshire and Wellington, just outside Cape Town, South Africa.  The staff in our Wellington office provide administrative support to the Bovingdon office, including dealing with all typing of digital dictation for the fee earners, as well as providing offshoring services to a number of renowned solicitors firms across the UK.

We have strong links with South Africa and much of our work is South African related and we have had a base there for 22 years.

Kerry Underwood is Senior Partner of Underwoods Solicitors and is the acknowledged expert on funding, costs, legal systems, client care, marketing and advertising of legal practices. His books on these subjects are considered the standard works. Kerry has written hundreds of articles on legal topics and is a regular contributor to Practical Law He appears regularly on radio and is frequently consulted by senior politicians and senior members of the Judiciary.

We act for a wide range of individuals including actors, sportsmen and sportswomen, judges and Members of Parliament as well as organisations large and small, national and international and sports clubs. We are often involved in advising governments, especially of commonwealth countries.

Sir Mike Penning MP PC, former Justice, Police and Armed Forces Minister, is a Non-Executive Director.

Leah Waller is a Consultant Solicitor that completed her training with us and now manages our employment law department as well as the HR for staff in the UK and South Africa.

Jordan Parkes, former Captain of Hemel Hempstead Town Football Club, is an ambassador of the firm.

The firm plays an important role in the community in both England and South Africa and has close links through support of the local sports teams as well as supporting local schools for special needs children. We are involved in several charities including the Lord’s Taverners and Lords Taverners South Africa which provide access to sport for disabled and disadvantaged children.

How to apply

To apply please send CV and covering email to claire.long@lawabroad.co.uk by Friday 6 January 2023.

Candidates will be invited for interview week commencing 9 January 2023.

Written by kerryunderwood

December 9, 2022 at 12:52 pm

Posted in Uncategorized

DEFENDANTS REDUCING PART 36 OFFERS AND CLAIMANTS INCREASING THEM

with 6 comments


It is becoming increasingly common for Defendants to reduce Part 36 offers, and this has been a trend for some time; indeed the Burrett v Mencap case on this point dates from 2014.

In Burrett v Mencap Ltd [2014] EW Misc B50 (CC) (14 May 2014)

the Court held that where a paying party had reduced its offer, and that reduced offer was accepted, the costs consequences ran from the first offer, and not the revised offer.

That case was decided under the old rules, and the old CPR 36.3 (6) provided:

‘After expiry of the relevant period and provided that the offeree has not previously served notice of acceptance, the offeror may withdraw the offer or change its terms to be less advantageous to the offeree without the permission of the Court.’

The case is not the same where the offer is revised upwards.

Thus, if a defendant makes an offer of £2,000 on day one, and then varies the offer upwards to £100,000 years later, then there is no doubt that time runs from that higher offer.

The wording in the old CPR 36.3 (6) refers to changing the terms “to be less advantageous to the offeree”.

There is logic in that. A client had a higher offer on the table, which they declined to accept, and then accepted the lower offer.

That is an entirely different situation from one where the offer is increased.

This point is specifically dealt with by the current governing rule which his CPR 36.9.

CPR 36.9 (5) reads:

(5) Where the offeror changes the terms of a Part 36 offer to make it more advantageous to the offeree—

(a) such improved offer shall be treated, not as the withdrawal of the original offer; but as the making of a new Part 36 offer on the improved terms; and

(b) subject to rule 36.5(2), the period specified under rule 36.5(1)(c) shall be 21 days or such longer period (if any) identified in the written notice referred to in paragraph (2).

Consequently, an improved offer is treated as a new Part 36 offer on the improved terms.

The current rule is no clearer than the old one in that sense and the logic of the decision in

Burrett v Mencap Ltd [2014] EW Misc B50 (CC) (14 May 2014)

still applies.

However, it was a first instance decision, and as far as I am aware, the point has never been considered by a higher court.

The rules were changed by the Civil Procedure (Amendment No. 8) Rules 2014, SI 2014 No. 3299 (L.36), which has at Schedule 1 the entire rule, and so Part 36 is now a Statutory Instrument, not simply a Civil Procedure Rule.

The amendment makes it clear, as I have set out above, that an upward variation is a new offer with time, and costs consequences, running from the date of that new offer.

However, Parliament specifically addressed the issue and provided that an increase in the offer amounts to a new offer but chose not to make the same amendment in relation to a decreased offer.

As set out above, there is logic in that why should a claimant not suffer the costs consequences of failing to accept a higher offer?

For all intents and purposes, it is analogous to the claimant only getting, say, £20,000 at trial, when £30,000 was on offer.

What About Claimants Increasing Their Offers

The logic is the same as in the reverse position.

A claimant makes an offer of £5,000 and subsequently raises that to £8,000 and gets, say, £9,000 at trial.

The offeree, the defendant in this instance, had their remedy, and had their chance, which was to accept the lower, therefore more advantageous, offer to them, of £5,000.

I use the terms offeror and offeree deliberately, as that is the language now of most of Part 36 and reflects the fact that the rules cut both ways.

There are certain instances where the terms claimant and defendant are used, but not in this context.

Thus, had Parliament wished to make the situation only apply where a defendant reduced its offer, and not where a claimant increased its offer, then it could have done so.

An interesting point is as to what happens if in the example given, the claimant recovered, say £7,000 at trial.

The claimant has beaten its original offer, but as that was changed upwards, it was no longer capable of acceptance, and thus the claimant has not beaten its revised offer.

My view is that the automatic Part 36 consequences do not follow, but that the Court should consider the defendant’s failure to accept an offer below the sum achieved at trial when it was available for acceptance.

One option is to award the claimant indemnity costs from expiry of the time for accepting £5,000 until the date when that offer became incapable of acceptance due to it being raised to £8,000.

I dealt with this issue, on slightly different facts, in my piece

PART 36: WITHDRAWN OFFER STILL COUNTS: AN UNFORTUNATE DECISION

which appeared at Pages 267 – 270 of Issue 49 of Kerry On Costs … And So Much More …

In that write-up, I dealt with the decision in

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

There, the Defendant’s Part 36 offer had been withdrawn, and the Claimant recovered less at trial than had been on offer in the withdrawn offer.

As set out above, that is a slightly different situation in that the offer was withdrawn rather than varied to make it less advantageous to the Offeree, but as a matter of pure logic, it seems to me to be the same.

In a sense, the offer has been varied to nil when it is withdrawn.

There, it was common ground that the automatic consequences of Part 36 did not apply.

However, it could still be considered under the general cost provisions in CPR 44, with the key issue being whether the Offeree acted reasonably in rejecting it when it was available.

That seems to me to be analogous to the position above, and the question would be whether it was reasonable for the Defendant not to accept the offer of £5,000 when it was available for acceptance.

On the face of it, if the Claimant then goes ahead and gets £7,000, then subject to the specific facts of the case, it would have been unreasonable.

The Court should put itself in the position of the party at the time, and not judge the case with hindsight.

These are far from easy matters, to put it mildly.

The extension of Fixed Recoverable Costs has now been delayed until October 2023, but the new Part 36 regime then, in all Fixed Recoverable Costs cases, will be that there will be a 35% enhancement for a successful Part 36 party.

With claimants, that means a 35% uplift on the Fixed Costs stages from expiry of the time for accepting the offer.

What we do not yet know is whether a claimant will get that uplift when a defendant accepts late.

Another unanswered question is whether a successful Defendant will receive an uplift.

Thus, the Defendant offers £50,000 very early on the case, which goes to trial and the Claimant recovers £40,000, and thus the Claimant is deprived of their costs from the date of expiry, and the Defendant gets their costs from the date of expiry, even though the Claimant has won the action.

That reflects the current position.

The penalty/reward there is that the losing claimant has lost the costs of almost the whole of the action and the defendant does not have to pay much by way of costs.

Clearly, that does not work with a claimant who matches or beats its own offer, as they would get costs in any event, and hence the need for the uplift, currently indemnity costs, but to be a straight 35% increase.

My view is that a successful Part 36 defendant should not get an uplift on costs as they already have their benefit as set out above.

Written by kerryunderwood

December 1, 2022 at 3:06 pm

Posted in Uncategorized

BELSNER: AN INTERESTING COURT OF APPEAL ORDER

with 9 comments


Kerry Is Back! Spring 2023 Tour: Extension of Fixed Recoverable Costs

Details here.

Book here.

I set out below the order of the Court of Appeal, following its landmark decision in

Belsner -v- Cam Legal Services [2022] EWCA Civ 1387, 27 October 2022

which I reported at length in Issue 77 under the heading –

CHALLENGES IN HIGH COURT TO SMALL BILLS MUST STOP SAYS COURT OF APPEAL.

The Order is of interest in any event, as it shows that Darya Belsner must pay to Cam Legal Services Limited the sum of £155,295.50 by 4.00pm on Monday, 28 November 2022.

The Order sets it all out, but it is a stark reminder that this case was about £295.50 and the other  £130, 000 is an interim payment in relation to one side’s costs plus the return of the £25,000  on account of Ms. Belsner’s costs, paid after she won in the High Court.

In spite of much comment to the contrary as the order makes clear, this is the liability of Darya Belsner, the original client of Cam Legal Services Limited, and not anyone else, and any reports to the contrary are plain wrong.

Whether or not Checkmylegalfees have given an indemnity to Ms. Belsner is a separate issue; Ms. Belsner is liable for the costs order which can be enforced against her directly by Cam Legal Services Limited, if not satisfied by Monday week.

This is not a personal injury case, but rather a Solicitors Act 1974 case, and although the original case was indeed a personal injury case, a claimant does not enjoy Qualified One Way Costs Shifting protection in relation to Solicitors Act 1974 proceedings, whatever the original subject matter, and so, in the event of defeat, as here, is liable for the other side’s costs.

This should act as a warning bell to those clients seduced by marketing offers of getting some legal fees back from solicitors about whom they never complained at the time.

However, the most interesting point of the Order is paragraph 9 or more particularly the fact that the Court of Appeal has included this in its Order, albeit at the prompting of Ben Williams KC for the solicitors, and agreed by Checkmylegalfees.

I do a lot of work relating to Section 51 of the Senior Courts Act 1981, often referred to as non-party costs orders, or wasted costs orders, and I can never recall seeing such a paragraph in the original order of the Court, as compared with an order made once an application for a Section 51 order has been made.

The legendary Professor Dominic Regan tweeting on the 16 November 2022, in response to one of my tweets said that:

“Nor me! We have read a fair few judgments over the years.”

Section 51 of the Senior Courts Act 1981 gives the Court unlimited discretion, to be exercised judicially, as to costs, and Section 51(3) could hardly be in wider terms:

“(3) The court shall have full power to determine by whom and to what extent the costs are to be paid.”

I have written extensively on this subject, and this piece is not the place for a full discussion of this topic.

However, a very brief summary may be useful.

Orders under Section 51(3) are generally known as non-party costs orders, and common examples of where the court makes such orders are against the individual directors, in their personal capacity, as compared with the Limited Company, so as to avoid satisfaction of the costs itself being avoided by Limited Liability status.

There is a great deal of case law on this subject, but putting it extremely briefly, a court will only generally consider such a non-party costs order if that non-party has intermeddled in the litigation, or stood to be the real beneficiary.

A very obvious, and common, example is a non-party costs order against a third party funder.

A non-party costs order does not of itself imply any wrongdoing, but simply that the successful party should have someone else against whom they can enforce any costs order.

Section 51 pointedly deals only with costs, and not damages.

Without commenting on the rights or wrongs of this case, it is very clear from the comments of the Court of Appeal, which it had no need to make for the purposes of the legal decision, that its view was that the potential beneficiary in this case was Checkmylegalfees.com, and not the lay client.

Paragraph 98 of the judgment in Belsner, the Court of Appeal said:

“98. The Client in this case has never had any real or economic interest in the pursuit of this costly litigation. Only checkmylegalfees.com have such an interest.”

In Karatysz v SGI Legal [2022] EWCA Civ 1388

the Court of Appeal said, at paragraph 45:

“45. The Client allowed checkmylegalfees.com to bring this costly case on her behalf, when she had almost nothing to gain.”

These are paradigm statements of the situation where a court would generally consider making a non-party costs order under Section 51(3).

It should be noted that such an order is designed precisely to avoid injustice to the successful party in being unable to enforce a costs order; in such a case there would be little point in making a non-party costs order against a Limited Company alone, if there was a chance that that Limited Company, due to the concept of Limited Liability, could not satisfy the order.

The Court has full powers to make the full costs order enforceable against the individual director/shareholders.

Section 51(6) of the Senior Courts Act 1981 is a very different animal, and allows the court to make an order against a legal or other representative and Section 51(13) defines “legal or other representative” as “any person exercising a right of audience or right to conduct litigation” on behalf of a party to the proceedings.

Thus, the court has power to make a wasted costs order against the solicitors and/or counsel, but it is a much higher threshold, and it does require fault on the part of the lawyer.

Section 51(7) reads:

“51(7) In subsection (6), “wasted costs” means any costs incurred by a party—

(a) as a result of any improper, unreasonable or negligent act or omission on the part of any legal or other representative or any employee of such a representative; or

(b) which, in the light of any such act or omission occurring after they were incurred, the court considers it is unreasonable to expect that party to pay.”

Where the court exercises the power under Section 51(6) it must consider informing the approved regulator of the lawyer concerned, that will generally be the Solicitors Regulation Authority or the Bar Council.

It is not suggested that Section 51(6) has, or will, come into play in this case, and the Court of Appeal’s Order specifically refers to a non-party costs order, and not a wasted costs order.

Finally, a thank you to Darren Draper and all of those at Cam Legal Services Limited who had the guts to pursue this matter, at great risk in costs, and to free decent lawyers doing their best to their clients from what the leading costs lawyer Ben Williams KC described as “a shakedown” of such solicitors.

You may, or may not, be interested in what I wrote about the High Court decision, overturned here by the Court of Appeal in no uncertain times.

Very clearly this subsection only applies to “proceedings” in a County Court – that is what it says.

Here, for reasons beyond me, it was conceded that, even though proceedings have not been issued, Section 74(3) was engaged.

That must be wrong, and is out of kilter with a range of recent decisions on the meaning of proceedings.

That being the case, apart from being wrong in law, the whole decision is obiter.

On the face of it, CPR 46.9 (2) does not require anything beyond a written agreement. It is hard to see what further “informed consent” is required. Which bit of “you will have to pay some of the costs yourself” is the client expected not to be able to understand?

It is in fact CPR 46.9 (3) which deals with informed consent, although that term is not used. That subsection effectively deals with the quantum of any charge to the client, whilst subsection (2) deals with the principle.

The decision of the court here that subsection (2) required informed consent is, in my opinion, an error of law, which makes the decision per incuriam, that is wrongly decided to such an extent that it does not need to be followed by other courts.

Fiduciary Duty

I wrote this:

“It is strongly arguable that the common law fiduciary duty has, in part, been overruled by that section.

In any event, where does this end? If, as a fiduciary, you cannot make a profit from the client without the client’s fully informed consent, presumably that means telling the client exactly what the profit will be. Afterall, a client may be happy with a 10% profit on the matter, but not a 40% profit.

Apart from the fact that it is impossible to tell at the outset in litigation what the percentage profit will be, does this also apply to, for example, Conveyancing, Wills and Probate?

On the basis of the decision in Belsner, a solicitor preparing a Will must, in advance of quoting a fee for the client, tell that client that they intend to make a profit in that Will and how much that profit will be.

After all, in Belsner, the issue was the level of profit, not the fact that the solicitor would make a profit.

Pandora’s Box hardly begins to describe the potential consequences of this decision.

I see the point in Belsner. I would, wouldn’t I – it is a judicial endorsement of the Underwoods Method and my Model Conditional Fee Agreement – more than an endorsement actually – it makes it mandatory.

However, the whole issue needs more thorough analysis, and if we are to have out and out contingency fees, and there is much merit in that idea, then let Parliament and the courts say so unambiguously.

Otherwise, we will be litigating forever, and let us be blunt, virtually all of these challenges are morally bankrupt.”

I normally expect the Court of Appeal to tone my remarks down; here they appeared to have done the opposite.

Written by kerryunderwood

November 17, 2022 at 10:57 am

Posted in Uncategorized

NATIONAL PRO OH NO! WEEK!

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Yes, it is that time of year again – National Nick What You Want Week, aka National Pro Bono Week.

This year everyone is working for free! It is not just solicitors expected to work for nothing.

Best not to try these until  confirmed as they are criminal offences:-

Free petrol!

Just fill up and drive away!

Free shopping!

Get that supermarket trolley as full as you can and proceed straight to your car! Remember to pay 5p for the bags though.

Travel

Why buy a ticket? Get on that bus or train and have a free trip!

Sports

Just climb over the fence or turnstile. Steal a free programme while you are at it!

Rejected ideas

The minutes of the National Oh No! Steering Advisory Council Committee Taskforce Thinktank Board show that, unsurprisingly, the following ridiculous – can you believe them?! ideas were rejected:

  • Free university education;
  • Legal aid;
  • Free dental care;
  • Free courts;
  • Free Employment Tribunals

Meanwhile I set out again an old favourite which is an actual exchange between a person we had had no previous contact with, who surprise surprise, obtained our name from an internet search, and Robert Males, my business partner, who, normally is rather milder mannered that me:-

Hello,

are you able to provide free legal representation? I am working, however I am not able to afford solicitors fees.

Thank you

Robert Males’ reply

Dear

I thank you for your enquiry.

My firm does not provide free legal representation. If my firm’s bank provides interest free loans, my governing  body, the Solicitors Regulation Authority, will authorize my firm to practise for free, my firm’s professional indemnity insurance is reduced to nil, my firm’s staff will all work for nothing, if the computer company who I deal with will provide all computers and servicing free of charge and if the stationery business who we deal with will give us all paper and consumables for free and the utilities will provide gas, electricity and water for free then I may be in a position to provide free representation. Until that time I am not.

My firm does however do a considerable amount of free work for charitable institutions including the Royal British Legion and the Lord’s Taverners charity for disadvantaged children as well as making donations to other very good causes.

The only reason that we can do this is because we charge our clients for the very high quality legal advice and work that we do on their behalf.

Yours sincerely

Robert Males

Solicitor

Managing Partner

UNDERWOODS SOLICITORS

Please see my related blog:-

A CHRISTMAS CAROL BY THE HIGH COURT

Written by kerryunderwood

November 11, 2022 at 7:40 am

Posted in Uncategorized

BELSNER AND KARATYSZ SPECIAL

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For more information and to book, please click here.

Written by kerryunderwood

October 28, 2022 at 3:16 pm

Posted in Uncategorized

CHALLENGES IN HIGH COURT TO SMALL BILLS MUST STOP SAYS COURT OF APPEAL

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I will be presenting a Zoominar on these cases next Thursday, 3 November 2022 at 4.00 – 5.00pm. £50 plus VAT for as many people as you want. Recording available whether or not you can attend. Please book here.

In two key and very important decisions delivered consecutively by the Court of Appeal today, with the same judges in each case, the Court of Appeal said that the appropriate forum for low value challenges to solicitors bill under the Solicitors Act 1974 was the Legal Services Ombudsman, and not the High Court.

Although the solicitors won in both cases, the Court of Appeal made it clear that if checkmylegalfees.com and others continued to bring “trivial claims” in the High Court, then they would be deprived of their costs, even if they won.

“Firms such as checkmylegalfees.com and their clients should be in no doubt that the courts will have no hesitation in depriving them of their costs under section 70(10) if they continue to bring trivial claims for the assessment of small bills to the High Court, even if those bills are reduced on the facts of the specific case by more than one fifth under section 70(9). The critical issue is and always will be whether it is proportionate to bring this kind of case to the High Court. In this case, it was not.” [Paragraph 45 of Karatysz v SGI Legal [2022] EWCA Civ 1388]

The Court of Appeal took the most unusual step of issuing a press summary in relation to what are two unrelated cases, in that there are no identical parties and nor were the legal issues the same.

The common factor is the attack upon claims like this being brought in the costs-bearing jurisdiction of the High Court.

Here is the Court of Appeal’s summary of the judgments in

Belsner -v- Cam Legal Services [2022] EWCA Civ 1387, 27 October 2022

and

Karatysz v SGI Legal [2022] EWCA Civ 1388

The Court of Appeal states that it will exercise it jurisdiction under 70(10) which allows the court to make such order as respect to the costs of the assessment as it may think fit, if there are “any special circumstances”.

Indeed this opens up the likelihood that not only will the successful client in a Solicitors Act 1974 challenge be deprived of their costs if they wrongly bring the matter in the High Court, but that they may be ordered to pay costs, even though successful.

The importance of these two decisions, and the fact that they were delivered consecutively, and of the joint press summary, and the tone of the language used by the Court of Appeal, can hardly be overstated.

BELSNER

In Belsner -v- Cam Legal Services [2022] EWCA Civ 1387, 27 October 2022

the Court of Appeal allowed the appeal of the solicitors against the deduction from their bill of costs, and gave important rulings on the law governing solicitor and own client retainers, and made highly significant comments concerning the business model of firms such as checkmylegalfees.com challenging solicitors bills in this way, and specifically named that firm who were the solicitors for the Claimant in this matter.

It should be noted that the key legal elements of the decision generally apply only to claims that have not been issued, and are classed as non-contentious.

I will make it clear which parts apply to all claims, and which parts apply only to unissued claims.

This claim was settled at Stage 2 of the Portal process, and thus, substantive Part 7 proceedings were never issued.

The Defendant’s insurer paid damages and fixed costs and disbursements, and the solicitors retained the fixed costs.

The solicitors retained out of damages a success fee of £321.25, being the charges capped at 25% of the recovered damages.

The client then instructed new solicitors trading as Checkmylegalfees.com to query the original solicitors’ bill.

Here, the Court of Appeal said:

“5. The Solicitors in this case were instructed by the Client to bring her claim on the RTA portal. The claim was settled at stage 2 after the provision of medical reports, as is common, with the defendant’s insurer paying damages of £1,916.98 plus fixed costs of £500 plus disbursements (ignoring VAT). The Solicitors retained the fixed costs and paid the Client the damages less a success fee of £321.25 (capped at 25% of the recovered damages – see [28] below). The Client later instructed new solicitors trading as checkmylegalfees.com to query the Solicitors’ charging. The Solicitors point out that the Client did not appeal DJ Bellamy’s assessment that they could reasonably have charged £1,392 (11.6 hours at £120 per hour) for their work (plus a success fee of £208.80), instead of the £321.25 plus £500 fixed costs (£821.25) which they actually asked for and were paid.”

On the first appeal, the High Court allowed the client’s appeal and permitted the solicitors to charge only the fixed costs recovered from the other side and a success fee of £75, which the High Court Judge applied on the basis of a success fee of 15% of fixed costs.

I have commented extensively on the heavily flawed decision of that High Court Judge, and will not repeat that here, although I may analyse matters in more detail in a future piece.

Suffice to say that the Court of Appeal agreed with me on virtually every point I have made in relation to the High Court decision in this case.

The High Court also assumed that the solicitor owed the client a fiduciary duty when the retainer was being negotiated, and that finding was also overturned by the Court of Appeal.

The Court of Appeal also disagreed with the High Court Judge in relation to Section 74(3) of the Solicitors Act 1974 and CPR 46.9(2), or rather whether it had any application to an unissued case.

The Court of Appeal then set out the provisions  of the statute and the Civil procedure Rules, which appear in the Judgment, and which I have written about before, and which I do not repeat here.

At paragraph 13 of the Judgment, the Court of Appeal set out the key questions to be determined:

(i) whether section 74(3) and Part 46.9(2) apply at all to claims brought through the RTA portal without county court proceedings actually being issued,

(ii) whether the Solicitors are required to obtain informed consent from the Client in the negotiation and agreement of the CFA, either due to the fiduciary nature of the solicitor-client relationship or through the language of Part 46.9(2),

(iii) if informed consent was required, whether the Client gave informed consent to the terms of the CFA relating to the Solicitors’ fees,

(iv) whether, in any event, what can be regarded as the term in the Solicitors’ retainer allowing the Solicitors to charge the Client more than the costs recoverable from the defendant to the RTA claim was unfair under the Consumer Rights Act 2015, and

(v) what are the consequences of the determination of these issues on the assessment in this case.

The Court of Appeal answered these questions as follows:

(i) section 74(3) and Part 46.9(2) do not apply at all to claims brought through the RTA portal without county court proceedings actually being issued,

(ii) the judge was wrong to say that the Solicitors owed the Client fiduciary duties in the negotiation of their retainer,

(iii) although the Solicitors were not obliged to obtain the Client’s informed consent to the terms of the CFA on the grounds decided by the judge, the Solicitors did not comply with the SRA Code of Conduct for Solicitors (the Code) in that they neither ensured that the Client received the best possible information about the likely overall cost of the case, nor did they ensure that the Client was in a position to make an informed decision about the case,

(iv) the term in the Solicitors’ retainer allowing them to charge the Client more than the costs recoverable from the defendant was not unfair within the meaning of the Consumer Rights Act 2015, and

(v) the court can and should reconsider the assessment on the correct basis, which is under paragraph 3 of the Solicitors’ (Non-Contentious Business) Remuneration Order 2009 (the 2009 Order), which requires the Solicitors’ costs to be “fair and reasonable having regard to all the circumstances of the case”. The costs actually charged to the Client in this case were fair and reasonable.

The finding at (i) apply only to non-issued matters, where court proceedings have not been issued.

Where County Court proceedings have actually been issued, then Section 74(3) and CPR 46.9(2) apply in full.

Given that at the outset solicitors will never know whether or not proceedings will be issued, my practical advice is that in every case, without exception, solicitors should at the outset, comply with Section 74(3) and CPR 46.9(2).

The finding at (ii) applies to all cases of all clients, whether litigation or conveyancing or whatever.

The finding at (iii) is somewhat hybrid in that different rules apply to different situations, and the judgment must be read as a whole.

The finding at (v) applies only to non-issued proceedings, that is non-contentious business.

The Court of Appeal made a number of other comments, and the timing is significant, as well as the content, as there is a holistic review of all Civil Litigation costs and processes, and that is currently being undertaken by the Civil Justice Council.

The Court of Appeal said that:

“…the distinction between contentious and non-contentious costs is outdated and illogical. It is in urgent need of legislative attention.”

“Secondly, there is no logical reason why Section 74(3) and Part 46.9(2) should now apply to cases where proceedings are issued in the County Court and not to cases pursued through the pre-action portals”

“Thirdly, it is unsatisfactory that, in RTA claims pursued through the RTA portal (and perhaps the Whiplash portal), solicitors seem to be signing up their clients to a costs regime that allows them to charge significantly more than the claim is known in advance to be likely to be worth. The unsatisfactory nature of these arrangements is not appropriately alleviated by solicitors deciding, at their own discretion, to charge their clients whatever lesser (and more reasonable) sum they may choose with the benefit of hindsight.”

“Fourthly, it is illogical that, whilst the distinction between contentious and non-contentious business survives, the CPR should make mandatory costs and other (e.g. Part 36 and PD8B) provisions for pre-action online portals, but otherwise deal only with proceedings once issued. Section 24 of the Judicial Review and Courts Act 2022 will allow the new Online Procedure Rules Committee (OPRC), in due course, to make rules that affect claims made in the online pre-action portal space. It would obviously be more coherent for the OPRC to make all the rules for the online pre-action portals …”

The Court of Appeal then made a highly significant comment, and whilst it does not represent the law, and was not a comment on the law, it is a significant and important comment:

“Finally, it is also unsatisfactory that solicitors like checkmylegalfees.com can adopt a business model that allows them to bring expensive High Court litigation to assess modest solicitors’ bills in cases of this kind. The Legal Ombudsman scheme would be a cheaper and more effective method of querying solicitors’ bills in these circumstances, but the whole court process of assessment of solicitors’ bills in contentious and noncontentious business requires careful review and significant reform.” [Paragraph 15 of the judgment]

I still find the decision somewhat confusing in the sense that the Court of Appeal appears to have looked at the whole sum that had charged by the solicitors to the client, and then deducted the success fee, with the rest representing part of the unrecovered solicitor and own client costs.

The correct way is to apply any charge made to the client to the unrecovered solicitor and own client costs element first, and only then, if there is any further charge to be made, to incur into success fee territory.

This is not a mere academic point, as the success fee is capped at a percentage of the Allowed Damages Pool, whereas the unrecovered solicitor and own client element is not.

I have not seen the actual bills in this case, and have not seen the way that they were structured, and it may be that the solicitors erroneously delivered a success fee bill to the client, when in fact everything could have been absorbed by the unrecovered solicitor and own client element.

It makes little difference to the rationale of this decision.

I set above that the finding at (iii) was something of a hybrid finding, and I now set out the Court of Appeal’s explanation of the first appeal Judge’s consideration of this aspect, which appears at paragraphs 40-43 of the judgment.

“40. The judge proceeded on the assumed basis that section 74(3) applied to RTA portal cases, noting at [42] that it was not disputed that the section applied except insofar as Part 46.9(2) might otherwise provide. A major issue before him was whether the phrase “expressly permits” in Part 46.9(2) meant that a client’s informed consent was required in order to disapply section 74(3).”

“41. The judge said at [34] that “[t]he relationship between solicitor and client is a fiduciary one. As a fiduciary, a solicitor may not receive a profit from his client without his client’s fully informed consent”. At [68], he said this I do not consider that this appeal can be determined by a simple comparison between the wording of [Part 46.9(2) and (3)]. The requirement for informed consent which applies in cases under [Part 46.9(3)] does not arise because of the use of the word “approval” rather than the word “agreement”. The requirement for informed consent arises because of the fiduciary nature of the relationship.”

“42. He then held at [69] that when interpreting Part 46.9(2): It goes without saying that an agreement for the purposes of [Part 46.9(2)] must be a valid and enforceable agreement. It follows, for example, that an agreement procured by fraud or misrepresentation would not suffice. Nor, obviously, would an agreement whose performance would involve a breach of fiduciary duty. To that extent, therefore, [Part 46.9(2)] requires informed consent.”

“43. On the basis that Part 46.9(2) required informed consent, he found that the Client had not provided informed consent to pay fees in excess of those recoverable from her opponent. Section 74(3) applied and the Solicitors were limited to charging fixed costs of £500 plus VAT in addition to the (reduced) success fee.”

Issue 1: Do section 74(3) and Part 46.9(2) apply to claims brought through the RTA portal without county court proceedings actually being issued?

The Court of Appeal deals with this issue at length at paragraphs 45 – 61 of the judgment and I have set out the conclusion above.

However, it is worth setting out the Court of Appeal’s definition of contentious business taken from the decision in

re Simpkin Marshall Ltd [1959] Ch 229 (Simpkin Marshall)

“There is now a clear and, I should have thought, logical division between contentious and non-contentious business. All business is now to be regarded as contentious which is done before proceedings are begun provided that the business is done with a view to the proceedings being begun, and they are in fact begun, and also all business done in the course of the proceedings. All other business is non-contentious.”

The Court of Appeal said that while it is true that the RTA Portal is an official process introduced by the Ministry of Justice, that does not make claims within it into proceedings in the County Court.

The fact that rules of court make various provisions for cases brought within the RTA Portal may be illogical, but it does not convert Portal claims into County Court claims. [Paragraph 58]

Civil Procedure Rules, specifically CPR 46.9(2) cannot enlarge the meaning of Section 74(3), “however convenient that might be”. [Paragraph 59]

In the context of the forthcoming reforms, the Court of Appeal made a significant comment at paragraph 61:

“61. These conclusions do not mean that the distinction between contentious and noncontentious costs is a meaningful or logical one now that the pre-action online portals form a significant part of the litigation environment. I have no doubt that the 1974 Act is in urgent need of legislative attention. Moreover, these conclusions do not mean that it is logical for section 74(3) and Part 46.9(2) to apply to cases where proceedings are issued in the County Court and not to cases pursued through pre-action portals.”

Issue 2: Were the Solicitors required to obtain informed consent from the Client in the negotiation and agreement of the CFA, either due to the fiduciary nature of the solicitor-client relationship or through the language of CPR 46.9(2)?

This is discussed at length by the Court of Appeal at paragraphs 62 – 81 of the judgment.

As it clear from the finding on Issue 1, the Court of Appeal had found neither Section 74(3) nor CPR 46.9(2) applied here, as it was non-contentious business.

Although CPR 46.9(2) does not apply, CPR 46.9(3) does, and that applies to the assessment of costs in both contentious and non-contentious business.

The Court of Appeal held that the High Court Judge was wrong to think that the client’s informed consent was required in this case because of the wording of CPR 46.9(2) as that “is and was irrelevant to the formation of the CFA in this case”.

The Court of Appeal went on to make the entirely valid point concerning the problem of not knowing at the outset, when a CFA is entered into, as to whether the matter will be issued or not.

“70. This conclusion may seem strange because, in theory, section 74(3) and Part 46.9(2) could have applied to this CFA, had county court proceedings been issued. It might have been said that, since the parties could not have known when they entered into the CFA whether, in future, proceedings would be issued, the conclusion is illogical. That, in my view, is just one unsatisfactory consequence of the fact that the current legislation takes no proper account of the fact that many claims are pursued in online pre-action portals without proceedings being issued. It cannot mean that statutory provisions applicable only to contentious business can be applied to non-contentious business.”

The Court of Appeal also recognized that the fact that CPR 46.9(2) did not apply “does not answer the question of whether the Solicitors owed the Client a duty to seek her fully informed consent to the level of their fees”. [Paragraph 71]

Did the fiduciary nature of the solicitor/client relationship or the solicitors’ duty of care give rise to a fiduciary duty to obtain the client’s fully informed consent?

This is dealt with at paragraphs 72 – 81 of the judgment, but the short answer is no.

However, the moment that solicitors start acting for a client there is a fiduciary duty, but only in relation to the steps that the solicitors take in relation to the case, and not in relation to the retainer.

In other words, if a case starts before the Conditional Fee Agreement is entered into, that does not create a fiduciary duty in relation to that retainer.

“80. The duty to ensure that clients receive the best possible information about pricing and the likely overall cost of the case may have similarities to fiduciary duties of loyalty, but they are not such duties. They are professional duties, and the consequences of the breach of a professional duty, even one given effect by statute, are different from the consequences of breaches of fiduciary duties.”

Issue 3: Did the Client give her informed consent to the terms of the CFA relating to the Solicitors’ fees?

This dealt with at paragraphs 82 – 86 of the judgment, and the Court of Appeal had already found that it did not think, as a matter of law, that the solicitors were obliged to obtain the client’s informed consent at the terms of the Conditional Fee Agreement, on the grounds decided by the High Court Judg.

 However, the Court of Appeal said that it was appropriate to explain what the solicitors should have done in order to comply with their professional duties.

 In this case, the solicitors neither ensured that the client received the best possible information about the likely overall costs of the case, as required by paragraph 8.7 of the Solicitors Code of Conduct, and nor did they ensure that the client was in a position to make an informed decision about whether she needed the service they were offering on the terms that they were suggesting as required by paragraph 8.6.

“84. In this case, the Client was given most of the information she needed to make those decisions, with the exception of one vital matter, namely the fixed recoverable costs that the defendant’s insurers would pay within the RTA portal. It would have been straightforward for the Solicitors to inform the Client of the level of the fixed recoverable costs that could be recovered at stages 1 and 2. The Client was told that the Solicitors estimated their base costs at £2,500 (net of VAT and disbursements), and that many such claims would settle within the RTA portal after production of medical evidence and financial losses. She was also given an estimate of £2,000 for her damages. Had she also been told of the level of the fixed recoverable costs, she would have been able to compare the likely recoverable costs with the amount she was being asked to agree to pay the Solicitors. As the Client submitted to us, she would then have known that she was assuming a liability to pay the Solicitors five times the costs she would be getting back from the defendant. I do not think that the Solicitors can be said to have complied with either [8.7] or [8.6] of the Code without providing that information.”

“86. In my judgment, it is wholly unsatisfactory for solicitors generally, and these Solicitors in particular, routinely to suggest that their clients agree to a costs regime that allows them to charge significantly more than the claim is known in advance to be likely to be worth. Solicitors do not resolve this unsatisfactory state of affairs by allowing a discretionary reduction of their charges after the case is settled. It would, in theory, be possible for there to be an order made under section 56 of the 1974 Act to deal with this problem, and perhaps some of the others I have identified in relation to current practice, by the establishment of reformed general principles applicable to the determination of the proper remuneration of solicitors in respect of non-contentious business within the pre-action online portals.”

Issue 4: Was the term in the Solicitors’ retainer allowing the Solicitors to charge the Client more than the costs recoverable from the defendant to the RTA claim unfair under the Consumer Rights Act 2015?

This is dealt with at paragraphs 87 – 92 of the judgment.

Section 62(4) of the Consumer Rights Act 2015 makes a term of a consumer contract unfair, and therefore, not binding on the consumer, if “contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer”.

The Court of Appeal set out the way the client put its case.

The term as to recovery of costs over and above fixed costs creates a significant imbalance to the client’s detriment, because it results in:

(a) a liability for base costs of a sum greatly in excess of the fixed maximum that would be allowed pursuant to s.74(3) Solicitors Act 1974, and

(b) consequent use of such base costs figure as the multiplicand in calculation of the success fee, in both cases without mentioning either

(i) the fact of the statutory protection provided by s.74(3) or its purported disapplication,

(ii) (how that statutory protection would have operated and how its disapplication is to the detriment of the client, or

(iii) the likely maximum in this particular case.

Thus, the client submitted that the term in her retainer as to recovery of costs over and above fixed costs created a significant imbalance to the client’s detriment, and was therefore, unfair.

The client put the case on the basis that the term was unfair because it results in the liability for base costs much in excess of “the fixed maximum that will be allowed pursuant to section 74(3)”.

As Section 74(3) did not apply in this case, a claim under the Consumer Rights Act 2015 also failed.

That does not mean, that had the client’s case been pleaded differently, such a claim would have failed.

Solicitors still need to ensure that they do not fall foul of Section 62(4).

Issue 5: The consequences of these determinations on the assessment in this case

The Court of Appeal proceeded to assess the costs on the basis of whether they were fair and reasonable under paragraph 3 of the Solicitors’ (Non-Contentious Business) Remuneration Order 2009.

It was.

The test was set out in paragraph 96:

“The ultimate question on an assessment of non-contentious costs, taking into account the factors stated in the 2009 Order, is: what overall amount would it be fair and reasonable for the client to pay? As Morgan J said in Mastercigars v. Withers [2009] 1 WLR 881 at [102]:

Even if the solicitor has spent a reasonable time on reasonable items of work and the charging rate is reasonable, the resulting figure may exceed what it is reasonable in all the circumstances to expect the client to pay and, to the extent that the figure does exceed what is reasonable to expect the client to pay, the excess is not recoverable.”

While the client ought, as a matter of good professional practice, to have been told the level of fixed costs that would be recovered from the other side if the matter settled within the Portal, that did not necessarily make the bill unfair, and here it was not unfair.

There is no legal duty on a solicitor to obtain fully informed consent to charge more by way of base costs that was recovered from the third party.

Perhaps the most important paragraph is one that does not deal with the law at all:

“98. The Client in this case has never had any real or economic interest in the pursuit of this costly litigation. Only checkmylegalfees.com have such an interest. The Solicitors capped their fees voluntarily at a fair and reasonable level after the event, even if they ought to have told the Client what she would recover by way of fixed costs in the RTA portal, and even if they ought to have agreed in advance when they entered into the CFA to the cap they later applied voluntarily.”

As to the law, the Court of Appeal restated what has been the law for a long time, namely that the issue under Section 70(9) of the Solicitors Act 1974 is as to what sum the solicitor is demanding, and not what the original contractual liability may have been.

Here the client achieved no reduction from the sum that the solicitor ended up asking for, and therefore, the starting position is that the client must pay the full costs of her application, and the two appeals to the High Court and the Court of Appeal, unless there are special circumstances under Section 70(10) of the Solicitors Act 1974.

The Court gave full reasons for that statement of the law, in the case it heard, with the same Judges, immediately after the Belsner case.

That case is Karatysz v SGI Legal [2022] EWCA Civ 1388.

KARATYSZ

In Karatysz v SGI Legal [2022] EWCA Civ 1388

the issue was the amount of the solicitors’ statute bill, the relevance being that Section 70(9) of the Solicitors Act 1974 provides that the costs of assessment are paid by the solicitors if the amount of the bill is reduced by one fifth, but otherwise by the client.

The District Judge had determined that the bill was £2,731.90 but the High Court on appeal had held it to be £1,571.50.

If the District Judge was right, then the solicitors would have to pay all of the costs of the first hearing, the appeal to the High Court, and this appeal to the Court of Appeal; if the High Court was right, then the client would have to pay all of those costs.

Here, the Court of Appeal held that the High Court Judge was right, and therefore, the client had to pay all of the costs.

However, the Court of Appeal said that it intended in the judgment to make clear how solicitors should frame their statute bills in future, so as to avoid future costly disputes of this kind.

The Court of Appeal said that in Belsner, it had already stated that:

(i) it is unsatisfactory that solicitors like checkmylegalfees.com can adopt a business model that allows them to bring expensive High Court litigation to assess modest solicitors’ bills in cases of this kind, and that

(ii) the Legal Ombudsman scheme would be a cheaper and more effective method of querying solicitors’ bills in these circumstances.

Essentially, here, the Claimant client was bringing into play all of the original bill as compared with the sum which the solicitors actually sought from the client at the end of the day.

I have written on this principle elsewhere and I will do so again, but the main purpose of this write up is the significance of the comments in relation to bringing these claims in the High Court.

In simple terms, the amount of the bill is the amount demanded, and not the amount that the solicitor claims he had the right to charge.

Part of the argument here, which I will deal with on another occasion, was that as the success fee is limited by reference to the full solicitor and own client costs, those costs must be established, and therefore, it must be those full costs which form the basis on which the court decides whether or not the client has achieved a 20% deduction.

The Court of Appeal made the following helpful comment:

“35. In reality, the proper question might be more clearly phrased, in respect of the category or categories of costs being assessed, as “what is the total sum that the bill is demanding be paid to the Solicitors, whether or not all or part of that total sum has actually been paid?”. It matters not whether the costs charged in the bill have been paid or not, so long as that fact is made clear on the face of the bill. I also do not think that it matters that the costs stated have been paid in whole or in part by a third party, whether insurer or not, again so long as that fact is clearly stated on the face of the bill.

The Court of Appeal then had this to say about the fact that this and similar matters are being brought in the High Court:

“45. The Client allowed checkmylegalfees.com to bring this costly case on her behalf, when she had almost nothing to gain. As Lavender J demonstrated at [42], she recovered £177.50 before DJ Bellamy, which was all that was really at issue except massive sums by way of costs. The process whereby small bills of costs are taxed in the High Court is to be discouraged. It is far more economic to use the Legal Ombudsman scheme which is a cheaper and more effective method of querying solicitors’ bills in these circumstances. Moreover, whilst it has not been necessary to decide whether there were “special circumstances” in this case under section 70(10), because the Client has not succeeded on her appeal, there remains a lesson to be learned from this case. Firms such as checkmylegalfees.com and their clients should be in no doubt that the courts will have no hesitation in depriving them of their costs under section 70(10) if they continue to bring trivial claims for the assessment of small bills to the High Court, even if those bills are reduced on the facts of the specific case by more than one fifth under section 70(9). The critical issue is and always will be whether it is proportionate to bring this kind of case to the High Court. In this case, it was not.”

The Court of Appeal then went on to give guidance as to how statute bills, or what it said should from now on be referred to as statutory bills be drawn.

Properly drawn bills ought in future to state the agreed charges and/or the amounts that the solicitors are intending by the bill to charge, together with their disbursements.

They should make clear what parts of those charges are claimed by way of

(i) base costs;

(ii)  success fee (if any), and

(iii) disbursements.

The bill ought also to state clearly:

(i) what sums have been paid, by whom, when and in what way (i.e. by direct payment or by deduction),

(ii) what sum the solicitor claims to be outstanding, and

(iii) what sum the solicitor is demanding that the client (or a third party) is required to pay.

Comment

These decisions are of enormous practical importance for solicitors, and are extremely welcome and will be applauded by probably all but two law firms in the country.

I will be presenting a Zoominar on these cases next Thursday, 3 November 2022 at 4.00 – 5.00pm. £50 plus VAT for as many people as you want. Recording available whether or not you can attend. Please book here.

Written by kerryunderwood

October 27, 2022 at 6:17 pm

Posted in Uncategorized

CIVIL JUSTICE COUNCIL COSTS WORKING GROUP CONSULTATION PAPER – JUNE 2022 – DEADLINE 12 NOON TODAY

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Part 4 – Consequences of the extension of Fixed Recoverable Costs

Here is my response.

RESPONSE TO CIVIL JUSTICE COUNCIL COSTS WORKING GROUP CONSULTATION PAPER – JUNE 2022

Part 4 – Consequences of the extension of Fixed Recoverable Costs

4.1 To the extent you have not already commented on this point, what impact do the changes to fixed recoverable costs have on the issues raised in parts 1 to 3 above?

Costs budgeting is not required, obviously, in cases subject to Fixed Recoverable Costs, and Guideline Hourly Rates have no application in relation to such cases either.

The existing Fixed Recoverable Costs scheme, and the very substantial extension in April 2023 both deal with pre-issue costs.

Consequently, Fixed Recoverable Costs eliminate the need to consider any of the issues raised in Parts 1-3 above, which is a very significant benefit of Fixed Recoverable Costs.

Fixed Recoverable Costs should be extended to all civil litigation without exception.

4.2 Are there any other costs issues arising from the extension of fixed recoverable costs, including any other areas in which some form of fixed costs or cost capping scheme may be worthy of consideration? If so, please give details.

As stated above, Fixed Recoverable Costs should be extended to all areas of civil litigation.

Fixed costs are preferable to capped costs, in that capped costs still create uncertainty, and allow scope for argument about the level of costs within the cap, and still leaves open the possibility of assessment of costs, and the attendant delay and expense.

4.3 Should an extended form of costs capping arrangement be introduced for particular specialist areas (such as patent cases or the Shorter Trials Scheme more generally)? If so, please give details.

As stated above, fixed costs are preferable to capped costs, but capped costs are better than no costs control at all.

One obvious area, currently heavily abused, is Solicitors Act 1974 challenges, where there are open, generally indemnity costs, even on the most trivial of claims.

Fixed costs should be introduced here as a matter of urgency, and generally I see no reason why Part 8 applications should be excluded from the Fixed Costs Regime.

Written by kerryunderwood

October 14, 2022 at 10:38 am

Posted in Uncategorized

CIVIL JUSTICE COUNCIL COSTS WORKING GROUP CONSULTATION PAPER – JUNE 2022 – DEADLINE 12 NOON TODAY

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Part 3 – Costs Under Pre-Action Protocols/Portals and The Digital Justice System

Here is my response.

RESPONSE TO CIVIL JUSTICE COUNCIL COSTS WORKING GROUP CONSULTATION PAPER – JUNE 2022

Part 3 – Costs Under Pre-Action Protocols/Portals and The Digital Justice System

3.1 What are the implications for costs associated with civil justice of the digitisation of dispute resolution?

Digitisation always leads to an increase in costs, as effectively the work has to be done twice, that is taking the information and then uploading it.

There are also significant extra costs in terms of maintaining the relevant software etc.

3.2 What is the impact on costs of pre-action protocols and portals?

3.3 Is there a need to reform the processes of assessing costs when a claim settles before issue, including both solicitor own client costs, and party and party costs?

3.4 What purpose(s) does the current distinction between contentious business and non-contentious business serve? Should it be retained?

I can deal with these together.

A key issue concerns assessing costs before court proceedings begin, and a recognition that in an age of portals, protocols and digital justice, whatever that means, there is not such an obvious point where the Rubicon is crossed, and proceedings are issued.

For example, in the existing portal system for personal injury work, do proceedings begin when:

i. The Claim Notification Form is lodged on the portal; or

ii. when Stage 3 is engaged, and a court fee paid; or

iii. only when the matter drops out of the process and substantive Part 7 proceedings are issued?

Pre-issue work is non-contentious, but becomes retrospectively contentious once proceedings are issued, which is why in a matter settled pre-issue there needs to be a contractual provision for costs, e.g.:

The defendant will pay the claimant’s reasonable costs to be assessed if not agreed.”

What is, or is not, contentious, or a dispute, was considered recently by the Supreme Court in

Bott & Co Solicitors Ltd v Ryanair DAC [2022] UKSC 8 (16 March 2022)

and remains to be ruled upon by the Court of Appeal in the seemingly endless saga of

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

In the absence of an entitlement to costs pre-issue, there is an incentive to issue, which goes against current Government and Judicial thinking, partly, or even mainly, because of the shortage of judges and resources.

That is a different issue from the desirability of certainty in relation to costs where matters are resolved through a quasi-Judicial pre-issue portal process.

Both the existing personal injury pre-action process, and the general civil litigation fixed recoverable costs scheme from April 2023, provide an entitlement to fixed costs where the matter is settled pre-issue.

However, there is a fundamental difference between personal injury work and other civil litigation, in that Qualified One-Way Costs Shifting means that an unsuccessful personal injury claimant generally does not pay the successful defendant’s costs.

In general civil litigation they do. Creating that liability pre-issue means that a putative claimant who does not go ahead with the claim is liable for the un-sued defendant’s costs.

Let us take an example.

It is April 2023. Charlie Claimant writes the email from hell to Denise Defendant claiming £100,000 and saying that it is a Band 4 case with maximum fixed recoverable costs.

Denise Defendant politely tells Charlie Claimant to go away and no further action is taken.

Under the new system the putative claimant has to pay the un-sued defendant £16,000 (see page 106 of Lord Justice Jackson’s Supplemental Report: Fixed Recoverable Costs).

That will come as a shock to some of the more aggressive litigators and their clients, and it throws up many issues.

When does liability crystalize?

In issued proceedings it would be on defeat, or on Notice of Discontinuance. Is there to be a form of pre-action strike out, so that if no action is taken for three months or whatever, then the inactive claimant becomes liable for costs?

Can a claimant keep it jogging along – at no extra costs as they are fixed – for the six-year limitation period?

What about a Litigant in Person who writes an email with it never occurring to them that they are thus engaging in a cost bearing litigation process?

Where does the system draw a line between, at one end, a mild Letter of Complaint, and at the other a full-blown Letter before Action?

The risk is that a digital process will be seen as a form of litigation and have the consequences of deterring parties from engaging and thus have exactly the opposite of the intended effect.

Small businesses in particular are concerned about this.

At the Civil Justice Council meeting there was a general view that there should be pre-issue costs liability, but no consensus on where to draw the line.

Whatever happens, it is hard now to justify the distinction between contentious and non-contentious business, and surely it is time that these terms were scrapped.

Likewise, the indemnity principle, which in any event has no application in fixed recoverable costs cases – see

Butt v Nizami [2006] EWHC 159 (QB)

The related matters of costs under pre-action protocols and portals and the digital justice system on the one hand, and fixed recoverable costs for pre-issue work whether the matter becomes issued or not, are of great importance if the desire is to have matters settled pre-issue.

At present there are more questions than answers.

Written by kerryunderwood

October 14, 2022 at 10:34 am

Posted in Uncategorized

CIVIL JUSTICE COUNCIL COSTS WORKING GROUP CONSULTATION PAPER – JUNE 2022 – DEADLINE 12 NOON TODAY

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Costs Budgeting

Here is my response.

RESPONSE TO CIVIL JUSTICE COUNCIL COSTS WORKING GROUP CONSULTATION PAPER – JUNE 2022

Part 1 – Costs Budgeting

1.1 Is costs budgeting useful?

Costs budgeting has some use, and it does act as a discipline on parties, and lessens the need for detailed assessment.

However, it achieves nothing that could not be achieved much more effectively by the extension of Fixed Recoverable Costs to all civil work.

1.2 What if any changes should be made to the existing costs budgeting regime?

It should be extended to civil claims above £10 million. Excluding such cases makes no sense at all; it is the equivalent of having a full budget for constructing a shed, but no budget at all for building a house.

The extension of Fixed Recoverable Costs in April 2023 to virtually all Civil claims valued at £100,000 or less will dramatically reduce the number of cases where budgeting applies.

Lord Justice Jackson’s original proposal, in his speech before his Report was published, was that Fixed Recoverable Costs should be extended to virtually all civil claims valued at £250,000 or less, and in the Business and Property Courts claims up to that value will be subject to a costs capping pilot.

I would scrap now costs budgeting on all cases valued at £250,000 or less on the basis that the Fixed Recoverable Costs regime up to £100,000 gives the court sufficient guidance in relation to claims up to £250,000.

In other words the Fixed Recoverable Costs figures, meticulously worked out, can act as a guide for parties and the courts in claims up to £250,000.

This also deals with the issue of incurred costs, in the sense that the Fixed Recoverable Costs scheme covers all stages, including pre-issue, and therefore, is much more valuable than a court budgeting the matter halfway through.

This would obviously greatly reduce the pressure on the courts, and the time and costs to lawyers and their clients.

The time and costs of budgeting is disproportionate in lower-value cases, as it does not take significantly less time to prepare a costs budget for a claim worth £200,000, as compared with one worth, say, £1 million.

This change can be progressive, in that if Fixed Recoverable Costs are extended to claims up to £250,000, which is expected to happen in due course, then costs budgeting could be scrapped for any claim valued at £500,000 or less.

1.3 Should costs budgeting be abandoned?

Not at the moment, but we should work toward its elimination by the spread of Fixed Recoverable Costs to all civil litigation in due course.

1.4 If costs budgeting is retained, should it be on a “default on” or “default off” basis?

It should be on default-off basis, that is the parties and the court would need to show justification for costs budgeting in any given case.

1.5 For cases that continue within the costs budgeting regime, are there any high-level changes to the procedural requirements or general approach that should be made?

I believe that I have dealt with these points above.

There is a central flaw in the concept of budgeting, in the sense that it is a budget to be paid by someone else.

Consequently, there is a perverse incentive to make the budget as high as possible, so in a sense it becomes the reverse of a budget.

Written by kerryunderwood

October 14, 2022 at 10:24 am

Posted in Uncategorized

EXTENDING FIXED RECOVERABLE COSTS: TODAY’S ZOOMINAR AT 4.00 PM

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Book here.

Today’s Zoominar will be discussing the whole issue of the extension of fixed recoverable costs to virtually all civil litigation valued at £100,000 or less, with effect from 3 April 2023.

Below is my Newsletter Special on this subject, and these are the topics we will discuss in the Zoominar.

EXTENDING FIXED RECOVERABLE COSTS SPECIAL

The three reports need to be read together and are here:

Review of Civil Litigation Costs: Supplemental Report Fixed Recoverable Costs

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

Fixed Recoverable Costs in Civil Cases: The Government Response

Introduction

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

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

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

So that is arguably the biggest change in costs for 787 years.

Ironically, given that fixed recoverable costs have to date been the preserve of personal injury cases and lawyers, virtually all of the exceptions from the new scheme running up to £100,000 are in the field of personal injury, and as far as general civil litigators are concerned, the only exceptions are:

  • Professional negligence;
  • Intellectual property; and
  • Judicial Review
  • Part 8 Claims
  • Solicitors Act 1974 challenges

Even intellectual property and professional negligence claims are brought into the Fixed Recoverable Costs Scheme if valued at £25,000 or less, and so the only fully exempt matters are Judicial Review, Part 8 claims and Solicitors Act 1974 challenges.

Make no mistake, for civil litigators this will change forever the way you work and think.

Lawyers have been described as terrible at anticipating change, but brilliant at adapting to it.

We will see.

Case Law

The extensive case law on fixed recoverable costs is likely to be applied to the new system.

Summary

The starting point is that there will be a new fast track limit of £100,000 for all civil claims, and that all claims in that fast track will be subject to fixed recoverable costs, unless specifically excluded.

Even the excluded categories will be subject to fixed recoverable costs if the claim is valued at £25,000 or less. So all civil litigation of all kinds valued at up to £25,000 will be subject to Fixed Recoverable Costs, with the exceptions of Part 8 claims, Judicial Review work and Solicitors Act 1974 challenges.

Lord Justice Jackson proposed a new intermediate track for claims valued at between £25,000 and £100,000, but the Government has chosen not to implement that, but rather to expand the fast track to include all sub £100,000 claims, but with fast fast track claims under £25,000 and intermediate fast track claims for the £25,000 to £100,000 bracket.

The current plan is that the new scheme come into effect this October – see November 2021 Civil Procedure Committee meeting minutes.

Lord Justice Jackson’s original intention was that the limit be £250,000, but he was persuaded to reduce that to £100,000, due to the apparent success of costs budgeting, but in the five years since his supplemental report, budgeting is regarded less favourably than it was, and the whole concept is now being reviewed.

There is a wholesale review of civil costs generally, conditioned by the Master of the Rolls, and this review includes considering whether costs budgeting should be modified, or even scrapped.

It would come as no surprise to me at all if, in say 2025 fixed recoverable costs were extended to claims up to £250,000, with the consequent reduction in cases that need to be budgeted.

Significantly the Business and Property Courts capped costs pilot covered claims up to £250,000.

Background

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

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

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

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

Review of Civil Litigation Costs: Supplemental Report Fixed Recoverable Costs

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

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

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

Extending Fixed Recoverable Costs in Civil Cases: The Government Response

On 10 December 2021, the minutes of the November 2021 Civil Procedure Committee meeting were published, giving the implementation date as October 2022, with this to be achieved by a complete re-draft of CPR 45 “to simplify and streamline the rules”

A policy decision has been made to implement these reforms ahead of the review of civil costs put in place by the Master of the Rolls on 25 November 2021, which will look at:

  • Costs shifting – should costs follow the event?
  • Budgeting – should it be modified or even scrapped?
  • Guideline Hourly Rates with specific reference to location – should it matter?

Exclusions and Variations

There are four different treatments of civil cases in the new regime.

1. Those excluded all together;

i. Part 8 claims;

ii. Judicial Review cases

iii. Solicitors Act 1974 Challenges

2. Those included, but only up to £25,000;

i. mesothelioma / asbestos

ii. professional negligence

iii. actions against the police

iv. child sexual abuse

v. intellectual property

vi. complex personal injury

Claims in these categories valued more than £25,000 will not be covered by fixed recoverable costs.

3. Those included up to £25,000 but with their own bespoke system;

i. clinical negligence

ii. noise induced hearing loss

iii. package holiday sickness claims

4. The rest, up to £100,000, are be covered by two different matrices

i. Sub £25,000 matrix of RTA;

ii. £25,000 to £100,000 matrix

Allocation to Track

For all intents and purposes, in spite of the decision not to adopt Lord Justice Jackson’s proposal of an intermediate track, there will be four tracks.

i. The Small Claims Track;

ii. Fast Fast Track;

iii. Intermediate Fast Track

iv. Multi-Track

As now, any case allocated to the multi-track will escape fixed recoverable costs.

The Escape Clause            

The Escape Clause, currently in CPR 45.29 J will remain.

45.29J

(1) If it considers that there are exceptional circumstances making it appropriate to do so, the court will consider a claim for an amount of costs (excluding disbursements) which is greater than the fixed recoverable costs referred to in rules 45.29B to 45.29H.

(2) If the court considers such a claim to be appropriate, it may—

(a) summarily assess the costs; or

(b) make an order for the costs to be subject to detailed assessment.

(3) If the court does not consider the claim to be appropriate, it will make an order—

(a) if the claim is made by the claimant, for the fixed recoverable costs; or

(b) if the claim is made by the defendant, for a sum which has regard to, but which does not exceed the fixed recoverable costs,

and any permitted disbursements only

Budgeting

There will be no costs budgets in fixed recoverable costs cases.

Qualified One-Way Costs Shifting

This will remain.

Multiple Claims

25% for each additional claimant in all cases, as compared with the current position where it is just for Package Holiday Sickness Claims.

Part 8 Claims

Part 8 claims will not be included until the new reforms have had time to bed in.

Court Fees

The existing multi-track court fees will apply to intermediate cases.

London Weighting

12.5% uplift to remain, but note the current review of civil costs, which questions whether location should have any relevance.

Indemnity Costs

(i) Part 36

Rather than detailed assessment of indemnity costs, there will be a 35% uplift on fixed costs in relation to the stages from the time of the Part 36 offer.

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

(ii) Unreasonable Litigation Conduct

There will be a percentage up lift on fixed recoverable costs of 50% where the court find that there has been unreasonable behaviour during litigation.

Bye bye time recording, work in progress and case management systems.

I deal with these matters in more detail below.

Interim Applications and Preliminary Issues

These will be dealt with differently, depending on which track and Band the matter is in, and I deal with this in more detail below.

Inflation and Uprating

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.

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 it is brought sharply into focus by the rapidly increasing levels of inflation.

In fact, 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 thar 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.

Assessment

In the event of dispute, the court will assess costs. If the case goes to trial, the trial judge will summarily assess costs at the end of the hearing.

If the case does not go to trial, there will be a shortened form of detailed assessment as set out in the last sentence of Practice Direction 47, paragraph 5.7, with a provisional assessment fee cap of £500.

Counsel’s fees

Ring-fenced only in Band 4 of the Fast Fast Track.

In the intermediate fast track counsel’s fees are ring-fenced for all Bands, and not just Band 4 as in the fast fast track.

In all cases where there is ring-fencing of counsel’s fees, they are fixed, and not capable of being a separate disbursement.

County Court Only

The fixed recoveble costs regime is a County Court only regime, and any cases allocated to the multitrack, or dealt with in the High Court, will not be covered.

This means that section 74 (3) of the Solicitors Act applies to all fixed recoverable costs cases, as that section applies to all County Court claims.

This is an important, and relatively little-known provision, and I deal with it in piece –

SECTION 74: KEY COSTS LAW YOU HAVE NEVER HEARD OF

The Indemnity Principle

Here I am referring to the indemnity principle, not indemnity costs.

In

Nizami v Butt [2006] EWHC 159 (QB)

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

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

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

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

Amount of Damages on Which Fixed Costs are Based.

If the claimant succeeds, the specified percentage applies to the sum recovered.

If the defendant succeeds, the specified percentage applies to the claim defeated, as valued in the particulars of claim. (Page 106 of the 2017 Report)

Consequently, if, for example, a claimant puts forward a claim of £100,000 for a claim where only £50,000 is likely to be recovered, then they stand to recover costs on the basis of £50,000 but stand to pay costs based on £100,000.

In intermediate cases the highest percentage of damages is 22% (Band 4, Stage 8) and so it follows that, in the example given by me, the claimant stands to recover £11,000 under this element, but is risking £22,000.

Admissions etc.

The fixed recoverable costs are based on the track, band, value and stage reached and whether there has been an early admission, or everything is fought out until the last, the figure is the same.

Having said that, an early admission will generally involve the matter going into a lower, cheaper band.

Influence of Fixed Recoverable Costs on Solicitors Act 1974 Challenges

This is likely to be a very significant issue

Unless a client has been fully and clearly informed as to how fixed recoverable costs work, and that they are an absolute limit on the amount to be recovered from the other side, and the fact that their own solicitor will seek to recover costs over and above those costs from their own client, then these are unlikely to be recoverable from the client.

Section 74 (3) only applies to County Court proceedings, and arguably only once proceedings are issued, but that matter is currently before the Court of Appeal in relation to the appeal against the decision in

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

and this is due to be heard by 31 July 2022.

However, CPR 46 (9) applies to all solicitor and client retainers, and not just in the County Court, and applies pre-issue as well as post issue.

Below I set out my write up which first appeared in Issue 44 at pages 159-160

COURT BUDGET EXCEEDED: “UNUSUAL COSTS” NOT RECOVERABLE FROM CLIENT: IMPORTANT DECISION,

together with Simon Gibbs’ write up which appears in Issue 44 at pages 161-162

SEEKING COSTS FROM CLIENT IN EXCESS OF APPROVED BUDGET – ST V ZY – Simon Gibbs

of the case of

ST v ZY [2022] EWHC B5 (Costs) (21 February 2022)

where the court refused to allow the solicitors to recover, on a solicitor and own client basis, anything beyond the budgeted costs.

For these purposes for ”budgeted costs” read “fixed recoverable costs”.

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 from paying the defendant’s costs, even if they lose.

Part 36

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 and Part 36

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)

Unreasonable Behaviour

There will be a fixed percentage uplift of 50% of fixed recoverable costs for unreasonable behaviour.

The stages to which this uplift apply will be decided by the judge on the basis of the nature and extent of the unreasonable behaviour.

There will be no facility within the fixed recoverable costs scheme to order indemnity costs as the Government takes the view that this is disproportionate and will inevitably lead to the need for solicitors to keep time records, and details of what level of fee earner did the work, and would also lead to assessment proceedings.

Thus, the successful party will receive a 50% uplift if it is the other party who has behaved unreasonably. What is not dealt with is the position where it is the successful party which nevertheless has behaved unreasonably in the litigation.

It would make sense to allow the court to reduce the successful party’s costs by 50%, if appropriate.

Interim Applications and Preliminary Issues

There will be fixed recoverable costs for interim injunction applications in Band 4 of the fast fast track and for preliminary issues.

The fixed costs for such applications are in CPR 45.29 H

45.29H

(1) Where the court makes an order for costs of an interim application to be paid by one party in a case to which this Section applies, the order shall be for a sum equivalent to one half of the applicable Type A and Type B costs in Table 6 or 6A.

(1A) Where the order for costs is made in a claim to which the Pre-Action Protocol for Resolution of Package Travel Claims applies, the order shall be for a sum equivalent to one half of the applicable Type A and Type B costs in Table 6A.

(2) Where the party in whose favour the order for costs is made—

(a) lives, works or carries on business in an area set out in Practice Direction 45; and

(b) instructs a legal representative who practises in that area,

the costs will include, in addition to the costs allowable under paragraph (1), an amount equal to 12.5% of those costs.

(3) If an order for costs is made pursuant to this rule, the party in whose favour the order is made is entitled to disbursements in accordance with rule 45.29I.

(4) Where appropriate, VAT may be recovered in addition to the amount of any costs allowable under this rule.

Thus, the fixed recoverable costs of an interim application in Bands 1-3 of the fast track is £250.

In relation to Band 4 cases, CPR 45.29 H (1) will be amended to provide that the fee be 2/3 of the applicable Type A and Type B, that is £333.33.

The fixed recoverable costs for an interim injunction application in the fast fast track should be £750.

All of these figures attract VAT, and where appropriate, London Weighting.

Intermediate Fast Track Cases

The court will decide who shall pay the costs of any interim application in the intermediate fast track and summarily assess them, and any such costs order will be additional to fixed recoverable costs.

THE FAST FAST TRACK – SUB £25,000 CLAIMS

The Bands

Band 1

  • Road traffic accident non-personal injury claims, that is damage to vehicles only, including  n     credit hire claims
  • Defended debt claims
  • Credit hire claims

Band 2

  • Road traffic accident personal injury claims within the existing portal systems
  • Package holiday sickness claims

Band 3

  • Road traffic accident personal injury claims outside the portal system
  • Possession claims
  • Housing disrepair claims
  • Other money claims

Band 4

  • Employers liability disease claims, excluding noise induced hearing loss claims
  • Complex possession claims
  • Complex housing disrepair claims
  • Property disputes
  • Professional negligence claims
  • Other claims at the top end of the fast fast track

The existing fixed recoverable costs schemes will be absorbed into this scheme.

Band Challenges

On allocation to track, the Judge will also allocate to one of the four Bands in all except multi-track or small claims track matters.

Either party may challenge that decision on paper under CPR3.3 (5) – (6) and the unsuccessful party will pay the successful party costs of £150.

Interim Applications and Preliminary Issues

There will be fixed recoverable costs for interim injunction applications in Band 4 and preliminary issues.

The figures vary, depending upon the band, and I deal with these separately below when looking at the costs generally in the new scheme.

Split Trials

Preliminary issue trials should be avoided in the fast fast track.

If there is a preliminary trial, followed by a subsequent trial, then two trial advocacy fees will be recoverable, but no other additional costs.

The two trials can be in different Bands.

Counsel’s Fees

These are not separately recoverable in Bands 1, 2 and 3 of the fast fast track, and cannot be claimed as a disbursement, thus ending the current ambiguity on this point.

In Band 4 of the fast fast track counsel’s fees will be recoverable as a fixed, ring-fenced sum.

The figures are in the table below.

Business And Property Courts

These matters are excluded from fixed recoverable costs, but have been subject to a capped cost pilot for claims up to £250,000.

Expect fixed recoverable costs to be brought in for claims of up to £250,000, possibly with an extension of the proposals here to £250,000, maybe in 2025.

INTERMEDIATE CASES

These will be in the fast track, subject to a separate procedural regime and to a separate grid of fixed recoverable costs.

Lord Justice Jackson identified the following criteria for intermediate cases.

2.1

i. The case is not suitable for the small claims track or the fast track.

ii. The claim is for debt, damages or other monetary relief, no higher than £100,000.

iii. If the case is managed proportionately, the trial will not last longer than three days.

iv. There will be no more than two expert witnesses giving oral evidence for each party.

v. The case can be justly and proportionately managed under an expedited procedure.

vi. There are no wider factors, such as reputation or public importance, which make the case inappropriate for allocation as an intermediate case.

vii. The claim is not for mesothelioma or other asbestos related lung diseases.

viii. Alternatively, even if none of criteria (i)–(vii) are met, there are particular reasons to allocate it as an intermediate case (of the kind prescribed in paragraphs 3.7–3.8 of his report).

Unsuitable Cases

Lord Justice Jackson said that the following would not usually fit the criteria, and therefore would not be suitable for fixed recoverable costs as intermediate cases, but sub £25,000 claims would be subject to fixed recoverable costs in the fast fast track, and possibly their own bespoke scheme.

Types of Claims Not Included if Valued At More Than £25,000

  • mesothelioma/ asbestos
  • professional negligence
  • actions against the police
  • child sexual abuse
  • intellectual property
  • complex personal injury
  • clinical negligence
  • noise induced hearing loss
  • package holiday sickness claims

Agreeing Track

The Pre-Action Protocols are to be amended to require parties to try and agree the appropriate track, and the appropriate Band for intermediate cases.

Claimants must set this out in the Letter of Claim and defendants must do the same in the Letter of Response.

2.4 We propose that provisional allocation of intermediate cases will be carried out first and foremost on the basis of any agreement between parties regarding the track. If such agreement has not been reached, cases will instead be provisionally allocated according to the value of the claim, with claims for debt, damages, or other monetary relief under £100,000 provisionally so allocated. Parties can challenge allocation via the directions questionnaire, giving their reasons. Allocation will then be reviewed and determined by the judge at the allocation stage. Should a party wish to challenge this further, they may then request a hearing on payment of the appropriate fee. We agree with Sir Rupert that ‘[i]f the only reason for holding a Case Management Conference (CMC) is the dispute about assignment, the unsuccessful party on that issue should incur a costs liability of £300 to the successful party’, but would welcome views on this.

Streamlined Procedure

  • statements of case no longer than 10 pages.
  • written witness statements as evidence in chief, with a party’s statements limited to 30 pages.
  • standard disclosure in personal injury cases; in non- personal injury cases each party will disclose the documents upon which it relies, as well as documents that the court specifically orders.
  • oral evidence limited to one expert witness per party (two, if reasonably required and proportionate), with each expert report limited to 20 pages (excluding photographs etc). Oral evidence will be time-limited and directed to the matters identified at the Case Management Conference.
  • applications to be made at the Case Management Conference, as much is possible.
  • control by the court of the scope and number of interim applications or procedural gamesmanship.

The Four Bands

4.1 As in the fast, fast track, there is a grid of Fixed Recoverable Costs for intermediate cases with four bands of complexity:

  • Band 1:

The simplest claims that are just over the current fast track limit, where there is only one issue and the trial will likely take a day or less, e.g. debt claims.

  • Band 2:

Along with Band 3 will be the ‘normal’ band for intermediate cases, with the more complex claims going into Band 3.

  • Band 3:

Along with Band 2 will be the ‘normal’ band for intermediate cases, with the less complex claims going into Band 2.

  • Band 4:

The most complex, with claims such as business disputes and ELD claims where the trial is likely to last three days and there are serious issues of fact/law to be considered.

Personal Injury Cases

  • Band 1

Straightforward, quantum-only cases

  • Band 2 and Band 3

Where both liability and quantum are in dispute

  • Band 4

will be used for cases where there are serious issues on breach, causation, and quantum, but which are still intermediate cases.

Non-Personal Injury Intermediate Cases

  • Band 1

Will be used for straightforward cases with only one issue in dispute, such as proving a debt

  • Band 2 or Band 3

Most non-personal injury intermediate cases will go into these Bands

  • Band 4

Will be used for more complex cases

Challenge to Band Assignment

Either party may challenge the assigned band at the case management conference and if this dispute is the only reason for the case management conference, then the losing party will pay £300 costs to the winning party.

Judicial Review

Subject to a separate procedure.

Relationship With Other Changes

The introduction of Fixed Recoverable Costs in civil claims up to £100,000 should not be seen in isolation, and I set out below a separate piece that I have written in relation to other changes which are likely to come in in the near future.

THE FIGURES

The Fast Fast Track

The figures are cumulative, except for trial advocacy fees, so, for example, the maximum Band 1 fee excluding trial is £3,250; Bands 2 and 3 are the current fast track pre-trial fixed costs in personal injury work with a 4% uplift for inflation since 1 April 2013.

The stages are the same as the existing ones.

I presume that that £1,001 – £5,000 Band will become £1,501 – £5,000 to reflect the rise in the small claim limit in non-road traffic account personal injury work.

Advocacy Fee Categories

  • (a) claims up to £3,000;
  • (b) £3,001 – £10,000;
  • (c) £10,001 – £15,000;
  • (d) £15,001 – £25,000

The Intermediate Fast Track

Note that the stages are very different from the existing ones in the fast fast track, and are a mixture of Stage reached and work done.

Thus, the issue of having to do a lot of work, due to court directions, but only getting the pre-listing Stage fee, as compared with the post listing Stage fee, is avoided, so is the anomaly of some courts allocating and listing at the same time, thus moving through two stages immediately or not.

The shaded areas are cumulative; the unshaded areas are free-standing add-ons, that is ring-fenced counsel’s fees for drafting the statement of case, advising pre-trial, and all advocacy matters.

There is no advocacy fee if the matter settles before trial, and it is presumed that, as with the existing, this will be if it settles before the day of trial.

However, there is a ring-fenced counsel/ specialist lawyer fee for advising in writing or in conference provided that it is no more than 14 days before trial.

Counsel’s fees

Ring-fenced only in Band 4 of the Fast Fast Track.

In the intermediate fast track counsel’s fees are ring-fenced for all Bands, and not just Band 4 as in the fast fast track.

In all cases where there is ring-fencing of counsel’s fees, they are fixed, and not capable of being a separate disbursement.

Interim Applications and Preliminary Issues

There will be fixed recoverable costs for interim injunction applications in Band 4 of the fast fast track and for preliminary issues.

The fixed costs for such applications are in CPR 45.29 H

45.29H

(1) Where the court makes an order for costs of an interim application to be paid by one party in a case to which this Section applies, the order shall be for a sum equivalent to one half of the applicable Type A and Type B costs in Table 6 or 6A.

(1A) Where the order for costs is made in a claim to which the Pre-Action Protocol for Resolution of Package Travel Claims applies, the order shall be for a sum equivalent to one half of the applicable Type A and Type B costs in Table 6A.

(2) Where the party in whose favour the order for costs is made—

(a) lives, works or carries on business in an area set out in Practice Direction 45; and

(b) instructs a legal representative who practises in that area,

the costs will include, in addition to the costs allowable under paragraph (1), an amount equal to 12.5% of those costs.

(3) If an order for costs is made pursuant to this rule, the party in whose favour the order is made is entitled to disbursements in accordance with rule 45.29I.

(4) Where appropriate, VAT may be recovered in addition to the amount of any costs allowable under this rule.

Thus, the fixed recoverable costs of an interim application in Bands 1-3 of the fast track is £250.

In relation to Band 4 cases, CPR 45.29 H (1) will be amended to provide that the fee be 2/3 of the applicable Type A and Type B, that is £333.33.

The fixed recoverable costs for an interim injunction application in the fast fast track should be £750.

All of these figures attract VAT, and where appropriate, London Weighting.

A detailed analysis and discussion of how best to run cases in the new system will be a key part of my full day live courses later in the year.

2022: ALL CHANGE FOR CIVIL LITIGATORS

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

October 11, 2022 at 9:50 am

Posted in Uncategorized

TODAY’S FIXED COSTS EXTENSION ZOOMINAR: STILL TIME TO BOOK!

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Tuesday 11 October 2022 04.00 pm – 5.00 pm

Following last week’s announcement by the Deputy Lord Chief Justice that the draft rules for the Extension of Fixed Recoverable Costs in April 2023 are now with the Rule Committee, you have no time to waste!

This covers virtually all civil claims valued at £100,000 or less and is not confined to personal injury claims.

This Zoominar, including a recording, costs just £35 plus VAT for as many of your colleagues as you want to attend.

Fixed Recoverable Costs Extension: 3 April 2023 – Where are we?

• All Civil Claims up to £100,000;

• The Figures;

• The Four Complexity Bands;

• New Part 36;

• Counsel’s fees;

• Preparing Now

Book here.

Recording will be sent, whether you can attend or not.

Written by kerryunderwood

October 11, 2022 at 8:57 am

Posted in Uncategorized

LEGAL COSTS TAXABLE IF PAID BY EMPLOYER: SETTLEMENT AGREEMENTS CAUGHT

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Kerry will be discussing this topic, and very many others, in his two 1-hour Zoominars at 4.00pm, this Wednesday 5 October and Tuesday 11 October 2022 – recordings are available whether or not you attend.

£35 for one Zoominar; £50 for both Zoominars – plus VAT in each case- including the recordings.

As many colleagues as you like from your organization can attend at no extra cost.

Please click here to book your place for the Zoominars.

In HMRC v Murphy [2022] EWCA Civ 1112 

the Court of Appeal held that where, as part of the settlement of an employment dispute, the employers paid the employees’ after the event insurance premium, and what is wrongly described as the success fee under a Damages-Based Agreement, those items were taxable in the hands of the employees, even though paid directly to the solicitors for those employees.

Whether the reimbursement of expenses by an employer to an employee is taxable as earnings from employment depends on whether the payment is a reward for services as an employee, with the label applied, or the mechanism for paying, being irrelevant.

The Upper Tribunal had been wrong to consider whether the employee received a benefit “over and above” the reimbursed expenses and wrong to find that as the sums paid did not amount to a profit for the employees, they were outside the definition of earnings in Section 62 of the Income Tax (Earnings and Pensions) Act 2003.

The Court of Appeal thus restored the decision of the First-tier Tribunal.

The tax payer and his fellow Claimant employees had settled a group action against the Metropolitan Police for unpaid overtime and other allowances, and had been paid a principal settlement sum, including an after the event insurance premium paid directly to the solicitors to reimburse the insurance providers.

There is also a reference to a success fee, and I will return to that point, as the Court of Appeal has got the law hopelessly wrong on this point, meaning that that part of the decision is per incuriam, that is wrongly decided, and therefore, not binding on other courts.

The Upper Tribunal ruled that as there was no profit to the employees in relation to these items, they were not earnings for tax purposes.

The Court of Appeal held that the correct question is whether the reimbursed expenses conferred a financial benefit in return for services, which is what is meant by the term profit in Section 62.

The Upper Tribunal had erred in seeking to distinguish Eagles v Levy [1934] (19 TC 23) on the basis that the agreement here expressly provided for the costs to be paid directly to the solicitors and insurers; the payment mechanism did not affect the character of the payment, and nor did the fact that these expenses had been incurred to recover sums due as remuneration, make them deductible.

Comment

A surprising decision that means that legal costs are taxable income in the hands of an employee in certain circumstances, even though they are paid to the employee’s solicitors.

It is trite law that costs belong to the client, and so to distinguish between “ordinary” legal costs, payable by the other side, and the element physically payable by the client herself or himself, makes no sense.

Presumably, here, if the settlement had not been on a global basis, but on the basis of compensation plus indemnity costs, that is all of the Claimants’ costs, no tax would have been payable, according to the Court of Appeal’s reasoning here.

However, as set out above, there can be no logical distinction between recoverable costs and generally unrecoverable costs, and again a solicitor always has to deliver a full bill to a client, even in relation to costs which the client does not physically pay, because they are recovered from the other side.

Indeed, due to the indemnity principle, unless there is that primary liability on the part of the client to pay her or his own lawyers, then nothing can be recovered from the other side.

This decision would seem fairly and squarely to capture all Settlement Agreements in employment matters, where it is standard practice for the employer to pay, or contribute to, the employee’s legal costs.

According to this decision, all such payments are taxable in the hands of the client, even though the client never sees the money.

It also raises the question of whether legal fees received from an employer in an employers’ liability personal injury case are taxable in the hands of the client.

Such cases could be distinguished on the basis that the damages are for personal injury, and the fact that it is the employer paying them and the legal costs, is irrelevant.

On the other hand the costs are clearly a benefit, according to this decision, being paid by the employer to the employee arising out of the employee’s employment.

Another point in the case is that the Court of Appeal, yet again, completely failed to understand the law in relation to damages-based agreements.

The lawyers do not get costs from the other side plus the damages-based agreement fee, but rather full credit must be given to the client by the lawyers against the fee within the damages-based agreement, and credit must be given for all costs received from the other side.

This is the so-called Ontario Principle, named after the conditional fee agreement regime in that Canadian Province.

In my view that makes the decision wrongly decided, as the Court failed to apply the law as applied by Parliament.

This is not a question of construction or interpretation; it is the Court of Appeal getting it plain wrong.

Putting aside the issue of the damages-based agreement, I can see logic in the decision of the Court of Appeal.

If, for example, an employer paid for an employee’s conveyancing fees of say £1,000, then clearly that would be a taxable benefit, and one can see the same logic applying to an employer paying for an employee’s costs, even if those costs are for an action against the employer itself.

However, that has certainly not been the view of lawyers or clients, especially in relation to Settlement Agreements.

Written by kerryunderwood

October 4, 2022 at 12:12 pm

Posted in Uncategorized

GUIDELINE HOURLY RATES ON INDEMNITY BASIS: SUMMARY ASSESSMENT BY HIGH COURT

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Kerry will be discussing this topic, and very many others, in his two 1-hour Zoominars at 4.00pm, this Wednesday 5 October and Tuesday 11 October 2022 – recordings are available whether or not you attend.

£35 for one Zoominar; £50 for both Zoominars – plus VAT in each case- including the recordings.

As many colleagues as you like from your organization can attend at no extra cost.

Please click here to book your place for the Zoominars.

In Eurohome UK Mortgages 2007-1 Plc v Deutsche Bank AG, London Branch & Anor [2022] EWHC 2408 (Ch)

the Chancery Division of the High Court ordered the Third Claimant to pay the costs of the Defendants on the indemnity basis, and the brief reasons for doing so are set out in paragraphs 44 – 48 of the judgment, and it should be noted that the Third Claimant, against whom the order was made, did not engage in the application in any way, and did not serve evidence, and did not appear at the hearing.

Consequently, it was unsurprising that costs were ordered on the indemnity basis, and it was unsurprising that those costs were assessed summarily. It would be going too far to say that it is now standard for High Court judges summarily to assess costs, but it is certainly becoming very common indeed.

Here the total of costs claimed was £72,287.

The receiving party had charged £710 an hour for a Grade A fee-earner as compared with the Guideline Hourly Rate of £512, and the High Court here said that although it had to bear in mind that “these are guidelines and are not fixed but they are an important starting point”  the case was not of such complexity as to justify a departure from the Guideline Hourly Rates, even on the indemnity basis.

This follows the case of

Eurosail-UK 2007-4BL Plc & Ors v Wilmington Trust SP Services (London) Ltd & Anor [2022] EWHC 1019 (Comm)

which I reported in Issue 67 under the heading Indemnity Costs and Guideline Hourly Rates.

There is no doubt that the courts generally are very reluctant to allow anything above the highest Guideline Hourly Rate of £512, and this was made clear in the cases of

Samsung Electronics Co Ltd v LG Display Co Ltd [2022] EWCA Civ 466

and

Athena Capital Fund SICAV-FIS SCA & Ors v Secretariat of State for the Holy See (Costs) [2022] EWCA Civ 1061

which I reported in Issue 67 under the heading Guideline Hourly Rates: Are They Now Tramlines?

A curious feature of the case was that the solicitors were charging nothing for a Grade C fee-earner even though a considerable amount of work was done by a Grade C fee-earner in relation to the documents.

The High Court was of the view that it should effectively blend the rates and factor into the Grade A fee-earner rate the fact that nothing was charged for the Grade C fee-earner.

Consequently, the Court held that there should only be a “relatively small deduction, essentially to reflect the fact that the grade A fees are somewhat higher than the hourly rates”.

Taking into account the blending the High Court reduced the costs by just £4,000, that is around 5.53%.

£3,000 was deducted from counsel’s fees.

Comment

Whatever the rights and wrongs of the decision, it is a bizarre state of affairs when a firm of solicitors in 2022 has a retainer that provides for no charge to be made for certain lawyers.

Due to the indemnity principle, this means that nothing can be claimed from the other side, and my view is that the receiving party here found the judge in the generous mood, possibly because of the entirely unreasonable behaviour of the losing Claimant.

Obviously, exactly the same could have been achieved for the client, without threatening recoverability due to the indemnity principle, by an appropriately worded conditional fee agreement.

The other point to note is that the Court, yet again, effectively applied the Guideline Hourly Rates, even in heavy commercial work, or maybe especially in heavy commercial work, and even when costs were awarded on the indemnity basis.

I have little doubt that had a Grade C fee-earner been charged out, with liability on the paying party, then the High Court here would have applied Guideline Hourly Rates.

It should be noted, however, that the top London rate of £512 an hour specifically reflects the fact that that covers heavy commercial work, which previously it did not do, and therefore, there should be no further uplift to reflect complexity etc.

However, the case also reflects the increasing tendency of the courts, even when ordering costs on the indemnity basis, to apply Guideline Hourly Rates.

Written by kerryunderwood

October 3, 2022 at 1:01 pm

Posted in Uncategorized

FIXED COSTS EXTENSION, VULNERABILITY AND QUALIFIED ONE-WAY COSTS SHIFTING

with 2 comments


Kerry will be discussing this topic, and very many others, in his two 1-hour Zoominars at 4.00pm on Wednesday 5 October and Tuesday 11 October 2022 – recordings are available whether or not you attend.

£35 for one Zoominar; £50 for both Zoominars – plus VAT in each case- including the recordings.

As many colleagues as you like from your organization can attend at no extra cost.

Please click here to book your place for the Zoominars.

The extension of fixed recoverable costs to virtually all civil claims valued at £100,000 or less is due to come in in April 2023, and the new Civil Procedure Rules are due to be published by the end of 2022.

The main consultation ended three years ago, but this year there was a consultation on two discrete issues concerning the extension:

  • Appropriate provisions for vulnerable parties;
  • Reconsideration of the rules concerning Qualified One-Way Costs Shifting.

The consultation closed in June 2022, and the response is awaited.

The consultation on vulnerability is here.

The consultation on Qualified One-Way Costs Shifting is here.

Vulnerability

The Ministry of Justice proposes that in relation to vulnerability of parties and witnesses, courts should be able, at the end of the case, to determine whether vulnerability caused sufficient extra costs to allow an escape from fixed recoverable costs.

There will be no power to make a declaration before the end of the case.

As with exceptional circumstances under CPR 45.29J, the extra costs would need to take the total to at least 20% above the fixed costs, with no maximum, but with reasonableness and proportionality applying as usual.

The consultation paper also sought views as to whether any new provision should also apply to the existing regime covering relatively low value personal injury works.

As with the current CPR 45.29J, a party which unsuccessfully applies to escape fixed recoverable costs or succeeds in the application but the total awarded is less than 20% greater than the amount of the fixed recoverable costs, then that party can be ordered to pay the costs of the party defending the proceedings or assessment.

That is currently achieved by a combination of CPR45.29K and CPR45.29L

“Claims for an amount of costs exceeding fixed recoverable costs

45.29J

(1) If it considers that there are exceptional circumstances making it appropriate to do so, the court will consider a claim for an amount of costs (excluding disbursements) which is greater than the fixed recoverable costs referred to in rules 45.29B to 45.29H.

(2) If the court considers such a claim to be appropriate, it may—

(a) summarily assess the costs; or

(b) make an order for the costs to be subject to detailed assessment.

(3) If the court does not consider the claim to be appropriate, it will make an order—

(a) if the claim is made by the claimant, for the fixed recoverable costs; or

(b) if the claim is made by the defendant, for a sum which has regard to, but which does not exceed the fixed recoverable costs,

and any permitted disbursements only.”

“Failure to achieve costs greater than fixed recoverable costs

45.29K

(1) This rule applies where—

(a) costs are assessed in accordance with rule 45.29J(2); and

(b) the court assesses the costs (excluding any VAT) as being an amount which is in a sum less than 20% greater than the amount of the fixed recoverable costs.

(2) The court will make an order for the party who made the claim to be paid the lesser of—

(a) the fixed recoverable costs; and

(b) the assessed costs.”

“Costs of the costs-only proceedings or the detailed assessment

45.29L

(1) Where—

(a) the court makes an order for costs in accordance with rule 45.29J(3); or

(b) rule 45.29K applies,

the court may—

(i) decide not to award the party making the claim the costs of the costs only proceedings or detailed assessment; and

(ii) make orders in relation to costs that may include an order that the party making the claim pay the costs of the party defending those proceedings or that assessment.”

Qualified One-Way Costs Shifting

The proposals include amending Section II of CPR 44 to allow a client’s entitlement to costs, as compared with just damages, to form part of the overall fund against which set-off can be applied.

This will be a statutory repeal of the decision of the Supreme Court in

Ho v Adelekun [2021] UKSC 43

It is also proposed to extend costs orders to include deemed orders, so that defendants can enforce a deemed costs order, most commonly following acceptance of a Part 36 offer, without needing the courts’ permission.

This will be a statutory repeal of the decision of the Court of Appeal in

Cartwright v Venduct Engineering Ltd [2018] EWCA Civ 1654

Here are my responses to the consultation,

Vulnerability

Here I utilize the numbers in paragraph 22 of the Consultation Paper, dealing with the specific questions.

i. Yes, but with qualifications as set out in the answer (ii) immediately below.

ii. Whilst I agree with the general thrust of the government’s proposals in paragraph 15, my view is that in any case where it is established that an additional amount of costs is warranted due to vulnerability, and the 20% threshold is crossed, there should, nevertheless, be a cap on those additional costs, or indeed a fixed additional uplift.

This introduces certainty and avoids detailed assessment and the delay and expense of that process.

It also means that parties entering into litigation will know the worst-case scenario if the other side is a vulnerable party.

It is very important to note that the extension of fixed recoverable costs is both in terms of value, that is extended to claims up to £100,000, rather than £25,000, but also in types of work.

At present the fixed recoverable costs scheme covers only personal injury cases, where the defendant is virtually always an insurance company, and where the claimant has the benefit of Qualified One-Way Costs Shifting.

That is not the case under the extended fixed recoverable costs regime, and so, for example, a small business may be subject to a claim and, without its prior knowledge, be facing open, standard, unfixed costs, because, unbeknownst to that small business, the claimant is a vulnerable party.

Turning that around, there may be a dispute between individuals where a claimant, unbeknownst to her or him, finds out that the defendant is a vulnerable party and again, the claimant faces open, unfixed costs if she or he loses.

By definition the additional costs can only come into play if they are at least 20% above the fixed recoverable costs, as that is the threshold of exceptionality.

Given that, I propose that either:

a) A fixed uplift of say 30% where there is a vulnerable party; or

b) a cap of say 40% over fixed recoverable costs.

I prefer (a) as having a cap, rather than a fixed uplift, still leads to disputes about costs and the potential need for detailed assessment, and of course introduces uncertainty.

I also leave believe that vulnerability should only apply in respect of parties, and not witnesses, unless of course that witness is a party.

As far as the extra work in dealing with a vulnerable witness is concerned, my view is that that is just part of the “swings and roundabouts” of litigation.

Related to that point, solicitors for the parties will know at the outset if there is any question on vulnerability but will not necessarily know whether any witness is a vulnerable person, as they would not have interviewed the witness.

I would require the solicitors for the claimant or defendant to state in the initial Letter of Claim or response that their client is a vulnerable party.

This puts the other side on notice, and therefore on notice that there may be additional costs.

Brief reasons as to why the solicitor states that their client is a vulnerable party should be stated, and a judge on consideration of the papers, and in giving directions, or a Case Management Conference, should have the power at that stage to declare that the party is a vulnerable person and that the uplift on costs will apply, or that they are not a vulnerable person.

The whole point of fixed recoverable costs is to introduce certainty, so that the parties know their costs position, and their potential exposure to adverse costs, at the outset, and to avoid detailed assessment.

That is reflected in the new rules relating to Part 36 and unreasonable behaviour, and in my view, we should seek to achieve the same in relation to vulnerability.

If the uplift is not to be fixed, then I would at least achieve the avoidance of detailed assessment by providing that if the criteria in paragraph (1) are met, then the court shall summarily assess the costs, with no power or discretion to order detailed assessment.

iii. My proposed changes would involve changes to the draft new rules and having summary only assessment of costs would also lead to changes in new rule 45.XY.

Below is the draft revised rule – Alternative A – if costs are to be capped as I suggest, and an Alternative draft B if they are to be subject to a fixed uplift as I suggest.

I have not drafted an alternative Rule in relation to the solicitor needing to state, in the Letter of Claim or response, that the party is a vulnerable party, as that properly belongs elsewhere in the Protocol provisions, and does not affect this rule in the costs Civil Procedure Rule 45.

iv. Yes. It makes sense to have as much consistency as possible throughout the whole fixed recoverable costs scheme and so there should be application to the existing fixed recoverable costs scheme in low value personal injury claims.

v. Yes.

If additional disbursements are necessary due to a party’s vulnerability, then in my view they should be recoverable, and such potential disbursements include interpreter’s fees, which is a sore point with many solicitors at present, as they have to incur these disbursements in order to conduct the case properly, but cannot recover them.

I would not allow additional counsel’s fees, as this is potentially a way of avoiding fixed recoverable costs, and should be considered as additional legal costs, rather than disbursements.

It is well established that a solicitor is entitled to charge counsel’s work as legal costs rather than a disbursement, and in my view that should happen if those additional costs are claimed to be because of vulnerability.

ALTERNATIVE A CAPPED COSTS

ANNEX A: DRAFT NEW VULNERABILITY RULE

NEW RULE 45.XX

Claims for an amount of costs exceeding fixed recoverable costs – vulnerability

(1) The court will consider a claim for an amount of costs (including disbursements) which is greater than the fixed recoverable costs referred to in rules X to Y where—

(a) a party – is vulnerable;

(b) that vulnerability has required additional work to be undertaken; and

(c) by reason of that additional work alone, the claim is for an amount that is at least 20% greater than the amount of fixed recoverable costs. (Rule 1.6 and Practice Direction 1A make provision for how the court is to give effect to the overriding objective in relation to vulnerable parties or witnesses).

(2) If the criteria in paragraph (1) are met, the court shall summarily assess the costs at no more than 140% of the sum of fixed recoverable costs that would otherwise have been paid.

(3) If the criteria in paragraph (1) are not met, it will make an order for the fixed recoverable costs and any permitted disbursements only.

NEW RULE 45.XY

Failure to achieve costs greater than fixed recoverable costs

(1) This rule applies where—

(a) costs are assessed in accordance with rules 45.XX(2); and

(b) the court assesses the costs (excluding any VAT) as being an amount which is in a sum less than 20% greater than the amount of the fixed recoverable costs.

(2) The court will make an order for the party who made the claim to be paid the lesser of—

(a) the fixed recoverable costs; and

(b) the assessed costs.

ALTERNATIVE B FIXED ADDITIONAL COSTS

ANNEX A: DRAFT NEW VULNERABILITY RULE

NEW RULE 45.XX

Claims for an amount of costs exceeding fixed recoverable costs – vulnerability

(1) The court will consider a claim for an amount of costs (including disbursements) which is greater than the fixed recoverable costs referred to in rules X to Y where—

(a) a party – is vulnerable;

(b) that vulnerability has required additional work to be undertaken; and

(c) by reason of that additional work alone, the claim is for an amount that is at least 20% greater than the amount of fixed recoverable costs.

(Rule 1.6 and Practice Direction 1A make provision for how the court is to give effect to the overriding objective in relation to vulnerable parties or witnesses).

(2) If the criteria in paragraph (1) are met, the court shall summarily assess the costs at 130% of the sum of fixed recoverable costs that otherwise would have been paid, plus disbursements.

(3) If the criteria in paragraph (1) are not met, it will make an order for the fixed recoverable costs and any permitted disbursements only.

If costs are fixed when the vulnerable party threshold is crossed, then there is no need for new rule 45 XY as there will be no assessment.

Qualified One-Way Costs Shifting (QOCS) Regime in Personal Injury Cases

I utilize the question numbers in paragraph 18.

i. I agree with the Government’s position.

ii. I agree with the Government’s position.

iii. No. You may, or may not, be interested in my attached piece –

Qualified One-Way Costs Shifting: No Set-Off of Costs against Costs says Supreme Court: Wrong Decision

which first appeared in October 2021, which sets out my thinking.

iv. No in relation to the specific question as to how QOCS might be reformed to ensure that there is an appropriate balance between the interests of claimants and defendants in personal injury cases.

However, generally, my view is that the rules dealing with Qualified One-Way Costs Shifting are too short, and fail to give proper guidance, with too much being left to the courts to interpret.

Consequently, I propose a wholesale re-write of those parts of CPR 44 dealing with Qualified One-Way Costs Shifting, and will be happy to draft this for you, but it does not directly relate to this Consultation.

Written by kerryunderwood

September 30, 2022 at 3:01 pm

Posted in Uncategorized

DELEGATING WORK TO CHEAPER FEE-EARNERS

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Kerry will be discussing this topic, and very many others, in his two 1-hour Zoominars at 4.00pm on Wednesday 5 October and Tuesday 11 October 2022 – recordings are available whether or not you attend.

£35 for one Zoominar; £50 for both Zoominars – plus VAT in each case- including the recordings.

As many colleagues as you like from your organization can attend at no extra cost.

Please click here to book your place for the Zoominars.

In Rushbrooke UK Ltd v 4 Designs Concept Ltd [2022] EWHC 1416 (Ch)

the Chancery Division of the High Court, in summarily assessing costs in relation to an application for an injunction to restrain presentation of a winding-up petition dealt with the issue of delegating “less important work to less expensive fee-earners”.

“14. Secondly, I am unhappy with the notion that everything here has been done by a single grade A fee-earner. One of the important skills of a solicitor is to know how to delegate less important work to less expensive fee-earners. Sometimes it is said that, well, there was no one else to delegate to (I do not know whether that is the case here). The answer to that plea, of course, is that, as between himself and his solicitor, the client is quite entitled to insist on the grade A fee-earner doing everything. On the other hand, as between him and his opponent, he or she is not necessarily entitled to require the opponent to pay for it. At that stage the question is instead whether the costs are reasonably incurred and reasonable in amount. And reasonableness takes account of potential delegation. Moreover, it is not for the paying party to have to identify work which could have been done by a more junior fee-earner. In my former experience over 30 years as a practising commercial litigation solicitor, there were no litigation cases that I was involved in in which no work whatsoever could have been delegated to a more junior lawyer. In the present case, for whatever reason, it seems that it has simply not been considered. For example (and it is only an obvious example), there was no need for the grade A fee-earner to attend at the hearing and sit behind experienced counsel, who did all the advocacy. A grade C or D fee-earner would have been fine.”

Written by kerryunderwood

September 30, 2022 at 12:03 pm

Posted in Uncategorized

SOLICITOR AND OWN CLIENT HOURLY RATE

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Kerry will be discussing this topic, and very many others, in his two 1-hour Zoominars at 4.00pm on Wednesday 5 October and Tuesday 11 October 2022 – recordings are available whether or not you attend.

£35 for one Zoominar; £50 for both Zoominars – plus VAT in each case- including the recordings.

As many colleagues as you like from your organization can attend at no extra cost.

Please click here to book your place for the Zoominars.

On a solicitor and own client assessment under the Solicitors Act 1974, it is always easier to justify basic charges than the success fee, and therefore as much of the charge as possible should be within the basic charge, which then reduces the amount of the charge which is a success fee.

It also maximizes the chances of the solicitors achieving the 50%, or 36%, or whatever, and it must be remembered that this is a cap, and not a fixed fee.

Let us take a simple example that demonstrates these two points.

The solicitor has agreed to cap all charges at 50% of damages and recovers £10,000 for the client, which obviously means that the maximum charge is £5,000.

They have done 10 hours work.

They utilize the Guideline Hourly Rates, as very many firms do.

The maximum charge to the client is as follows:

Thus, the solicitors cannot achieve a charge of 50% of the damages.

Let us assume that they take my advice and charge Guideline Hourly Rates plus 50%, which would give an hourly rate of £327.

The picture is now as follows:

As the total charges are to be capped at 50% of damages, the success fee element will be only £1,730 as follows:

The success fee is calculated as a percentage of the basic charges, and that works out at a success fee of 52.91%.

Thus the solicitor achieves the desired fee, and has the benefit of the success fee being 52.91%, rather than 100%, which would obviously be easier to justify on a Solicitors Act 1974 assessment.

Written by kerryunderwood

September 30, 2022 at 10:20 am

Posted in Uncategorized

GUIDELINE HOURLY RATES: ARE THEY NOW TRAMLINES?

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Kerry will be discussing this topic, and very many others, in his two 1-hour Zoominars at 4.00pm on Wednesday 5 October and Tuesday 11 October 2022 – recordings are available whether or not you attend.

£35 for one Zoominar; £50 for both Zoominars – plus VAT in each case- including the recordings.

As many colleagues as you like from your organization can attend at no extra cost.

Please click here to book your place for the Zoominars.

This piece first appeared, in a slightly different form, on the Practical Law Dispute Resolution Blog.

It has been observed that Guideline Hourly Rates are just that – guidelines and not tramlines; in other words the courts are free to depart from them.

That view is now barely sustainable following a number of recent decisions, including two in the Court of Appeal.

In Samsung Electronics Co Ltd v LG Display Co Ltd [2022] EWCA Civ 466

the Court of Appeal said that even in very heavy commercial work, a party must provide “clear and compelling justification” to depart upwards from London 1 Guideline Hourly Rates as those rates “already assume that the litigation in question qualifies as “very heavy commercial work””.

In Athena Capital Fund SICAV-FIS SCA & Ors v Secretariat of State for the Holy See (Costs) [2022] EWCA Civ 1061

the Court of Appeal referred to the Samsung decision saying:

“the appellants’ solicitors’ costs comprised £175,000 (including hourly rates charged well in excess of the guideline rates set out in Appendix 2 to the ‘Summary Assessment of Costs’ guide published in the White Book) … This court has recently held that, in the case of solicitors’ fees, if a rate in excess of the guideline rate is to be charged to the paying party, a clear and compelling justification must be provided: Samsung Electronics Co Ltd v LG Display Co Ltd [2022] EWCA Civ 466. No such justification has been advanced in this case.”

“It may be worth emphasising one aspect. In my experience there has been a view that the previous set of Guideline Hourly Rates (before 2021) were not directed to the heaviest work such as takes place in the Business and Property Courts. In part no doubt this was because they were so out of date. Whatever the position was or was thought to be, it changed in the current set of Guideline Hourly Rates, which were approved by the Master of the Rolls in August 2021. As my Lord pointed out in Samsung v LG, the current set includes a band called ‘London 1’ which is a set of rates directed expressly to very heavy commercial and corporate work by centrally London based firms. I would add that the London 1 rates band in the current Guideline Hourly Rates is based on evidence from the Business and Property Courts themselves (see the Civil Justice Council’s Final Report of April 2021). Therefore the London 1 band is directly applicable to this case and so a justification for the much higher rates was needed.”

That seems to be that as far as the heaviest commercial work is concerned.

In Rushbrooke UK Ltd v 4 Designs Concept Ltd [2022] EWHC 1416 (Ch)

the Chancery Division of the High Court, in summarily assessing costs in relation to an application for an injunction to restrain presentation of a winding-up petition, reduced the hourly rate claimed to the guideline rate.

“13. In my judgment, both criticisms of the respondent’s costs schedules by the applicant have some force. The new costs guideline hourly rates came into force in October 2021. They are of course merely guidelines, but they represent a consensus view of what average work should cost in particular areas of the country (so taking into account regional variations) and the experience and expertise of the relevant fee-earner. I see nothing in the present case to suggest that the work done here was above average either in difficulty, or in complexity, or in novelty, or in importance to the client, or in some other way. This was, if I may respectfully say so, typical business work. A figure slightly above the guideline, so to say, within touching distance of it, would not be too high. A figure £89 (34%) above the guideline in my opinion is too high.”

The Court also said that some of the work should have been delegated to more junior lawyers.

“14. Secondly, I am unhappy with the notion that everything here has been done by a single grade A fee-earner. One of the important skills of a solicitor is to know how to delegate less important work to less expensive fee-earners. Sometimes it is said that, well, there was no one else to delegate to (I do not know whether that is the case here). The answer to that plea, of course, is that, as between himself and his solicitor, the client is quite entitled to insist on the grade A fee-earner doing everything. On the other hand, as between him and his opponent, he or she is not necessarily entitled to require the opponent to pay for it. At that stage the question is instead whether the costs are reasonably incurred and reasonable in amount. And reasonableness takes account of potential delegation. Moreover, it is not for the paying party to have to identify work which could have been done by a more junior fee-earner. In my former experience over 30 years as a practising commercial litigation solicitor, there were no litigation cases that I was involved in in which no work whatsoever could have been delegated to a more junior lawyer. In the present case, for whatever reason, it seems that it has simply not been considered. For example (and it is only an obvious example), there was no need for the grade A fee-earner to attend at the hearing and sit behind experienced counsel, who did all the advocacy. A grade C or D fee-earner would have been fine.”

What these cases do not deal with is the more ordinary rates for other geographical areas and types of work, where such special provision is not made within the guideline hourly rates.

For example, if a firm in Plymouth, Cardiff, Liverpool, Newcastle, Manchester or Hemel Hempstead, or wherever, is conducting a complex commercial, or clinical negligence case, or whatever, are they to be restricted to the local guideline hourly rates which, unlike the London 1 rates, make no provision for the complexity or heavy-weight nature of the case?

Maybe, or maybe not.

In Athena, the Court of Appeal was at pains to point out that, for heavy commercial work, things changed with the new Guideline Hourly Rates, effective 1 October 2021, but that is not the same with other work.

However, as reported extensively by me in various articles, the courts are now very reluctant to allow guideline hourly rates to be exceeded, even on solicitors and own-client assessments.

In a separate, but important, comment in Athena, the Court of Appeal criticized the paying party for not challenging the hourly rates and counsel’s fees of the receiving party, and suggested this may be because their own fees were also “disproportionately high”.

The Court of Appeal made it clear that the courts should step into the arena and reduce disproportionate costs, even if the paying party does not challenge them.

“It is a striking feature of the present situation, that although almost every possible point has been taken on both sides in the course of this appeal, there has been no challenge either to the appellants’ solicitors’ hourly rates or to the brief fees and other fees charged by their counsel. However, the costs payable by the losing party on the standard basis are limited to those which are reasonable and proportionate. Where the costs of the paying party are also disproportionately high, that can make no difference. In any event the court will scrutinise cost schedules in order to keep levels of recovery within reasonable bounds.”

This statement by the Court of Appeal may, or may not, be connected with Jim Diamond’s forthcoming book – The Legal Extortion Racket – which is out later this year.

According to Jim Diamond, hourly rates for partners in the so-called magic circle firms have now reached between £1,000 and £1,500 an hour.

Partners in United States firms based in London charge between £950 and £1,350 an hour while London firms outside the magic circle charge £900 an hour.

Newly qualified solicitors at magic circle firms and US firms in London charge £600 an hour while other City of London firms outside those groups charge between £300 and £450 an hour for newly qualified solicitors.

This comes at a time when one US law firm based in London that is paying newly qualified solicitors almost £180,000 a year, whilst others are paying around £125,000 a year.

Recent decisions in the Court of Appeal and various divisions of the High Court have shown that there is no prospect whatsoever of anything like these hourly rates being recovered from the other side, and indeed the courts are repeatedly sticking to Guideline Hourly Rates in all types of work and in relation to both summary and detailed assessments.

Throw into the mix of with effect from 3 April 2023, virtually all civil litigation claims valued at £100,000 or less will be subject to fixed recoverable costs, and one wonders when the clients bearing these costs will say “enough is enough”.

Fixed recoverable costs are likely spread soon to all civil claims valued at £250,000 or less.

Set out below are the City of London law firms’ hourly rates.

CITY OF LONDON (MAGIC CIRCLE) LAW FIRMS – HOURLY RATES

 Year NQ-2yrs PQE 5yrs PQE Partner
 2003  £175-£185 £245-£280 £375-£450
 2005 £180-£215 £250-£300 £425-£525
 2007 £235-£250 £375-£450 £625-£700
 2008 £250 £350-£400 £600-£750
 2009 £250 £375 £450
 2010 £300-£350 £450-£550 £650-£725
 2013 £350-£425  £450-£550 £700-£850
 2015 £350-£500 £500-£575 £775-£850
 2022 £450-£600 £650-£850 £1,000-£1,500

I am grateful to Jim Diamond and The Law Society Gazette.

In Issue 55, pages 425 – 434, in the article –

TIME AND THE CLIENTS: THE NEW FIXED COSTS SCHEME COMMENCING 3 APRIL 2023

I set out these two very short, but very important Court of Appeal judgments in full.

The issue of departing from the Guideline Hourly Rates for specialist work performed outside London was considered by the Chancery Division of the High Court in

Lappet Manufacturing Company Ltd & Anor v Rassam & Ors [2022] EWHC 2158 (Ch)

Where the court allowed £350 per hour for a partner, and £230 for a Grade C fee-earner in Nottingham, saying that a departure from the guideline hour rates was justified on the basis of “the long- established principle that specialist solicitors in specialist areas of activity should recover an uplift to reflect that specialism, where that is justified in the circumstances”.

The current guideline hourly rates for these level fee-earners in Nottingham are £261 per hour and £178 per hour, respectively.

The receiving claimants had succeeded in opposing two applications in relation to an action concerning trademarks and this was a separate judgment in relation to the costs of those applications.

“12. In this case, I am satisfied that there is justification for an increase on the Nottingham Guideline rates. That arises from the complexity of the issues which arose on the two applications I disposed of. Both required specialist knowledge of the procedure applicable to intellectual property claims, and trade mark claims in particular. The intricacies will be readily apparent from my earlier Judgment. In my opinion, the Claimants were thus fully justified in engaging solicitors with the appropriate specialist knowledge, appropriate to advising on the issues in question and managing the conduct of the Defendants’ applications. I do not regard this case as one in which the justification is put forward only in a generalised way: it is put specifically on the basis of the specialist procedural knowledge needed in order to act effectively. It therefore does not fall foul of the proscription set out by Males LJ in the Samsung case. Instead, as I see it, a departure from the Guideline Rates is justified on the basis of the long-established principle that specialist solicitors in specialist areas of activity should recover an uplift to reflect that specialism, where that is justified in the circumstances: see, e.g., ABS Company Limited v. Pantaenius UK Limited and others [2020] EWHC 3720 (Comm), per HHJ Pelling at [64].”

The Court here also made a similar point that was made by the Court of Appeal in Athena.

“17. I agree that the amount claimed is high and should be reduced. I will reduce it to £6,000. The only argument against reduction advanced by the Claimants is that the counsel fees claimed by the Defendants were in excess of £8,400. That is true: they total £12,840. All that goes to show, however, is that the Defendants’ fees for counsel were also disproportionately high. It does not, in itself, justify the Claimants’ counsel fees.”

In Brake & Anor v Guy & Ors [2022] EWHC 1911 (Ch) 

the Chancery Division was summarily assessing costs on the indemnity basis after an application in relation to a third party debt order and the receiving law firm is based in Central London.

The Court held that it was the work, and not the location, which determined whether London 1 or London 2 rates should apply:

“… the mere fact that a Central London law firm does predominantly very heavy commercial and corporate work does not mean that when it does a piece of work which is not such work the same “London 1” guideline rates still apply. In my judgment, work done by such a firm which is not “very heavy commercial and corporate work” will fall under “London 2” rather than “London 1” as “other work.””

The Court also applied the appropriate Guideline Hourly Rates, even though costs were on the indemnity basis.

“49. I do however make clear that I see no reason why a piece of litigation may not qualify in an appropriate case as “very heavy commercial and corporate work”. I do not think that that expression is restricted purely to transactional matters. However, in my judgment the work done on these two applications is simply not heavy enough to fall into that category. Indeed, the first of the two applications was straightforward, the kind of thing which is given to a junior solicitor or even a trainee. The injunction application was more difficult, but still not “heavy”, let alone “very heavy”. In my judgment these two applications constitute “other work in the City or central London”, and therefore fall within “London 2”.”

“50. Of course, as the Guide says, the guideline figures are intended only to provide a starting point for those faced with summary assessment. As the Guide then goes on to say,

“29. In substantial and complex litigation an hourly rate in excess of the guideline figures may be appropriate for grade A, B and C fee earners where other factors, for example the value of the litigation, the level of the complexity, the urgency or importance of the matter, as well as any international element, would justify a significantly higher rate. … “

I bear all that in mind. Nevertheless, I cannot see that there are any factors involved in these applications which would justify hourly rates significantly in excess of the guideline figures. When I come to assess the costs, therefore, I will be looking at hourly rates in the region of the figures given in “London 2”.”

Inflation

You need to have been qualified as long as I have to have worked with inflation in double digits as it is now, and this is obviously a major problem with Guideline Hourly Rates, which have only existed for around 20 years.

The so-called Rule of 72 is a way to calculate how quickly money loses its value in a period of inflation.

Quite simply divide 72 by the annual rate of inflation to determine the amount of time it takes for the value of money to halve.

With inflation now forecast to hit 18%, the value of money halves in four years.

This has been a major issue with fixed recoverable costs, that is that they have not been uprated at all, in the nine years since their introduction on  1 April 2013.

Unless the system is changed, or the courts uprate costs awards to reflect inflation, costs received in four years’ time for work done now will be worth half the current rate.

There is an additional problem in relation to courts only awarding Guideline Hourly Rates even on the indemnity basis, and that is that it sharply devalues the whole concept of Part 36 offers.

A claimant who matches or beats its own Part 36 offer at trial is entitled to costs on the indemnity basis, and that has traditionally been thought to mean that the starting point is the hourly rate which the client was paying its own solicitor.

If the only difference between standard costs and indemnity costs is that proportionality does not apply, and that the balance of proof shifts from the receiving party to the paying party to show that any expense was unnecessary or unreasonable, then the reality is that in most cases there will not be much difference between standard rate costs and indemnity rate costs.

This issue needs clarifying and resolving, as with effect from April 2023, in fixed recoverable costs, there will be a 35% uplift for a party matching or beating its own Part 36 offer.

This was very much predicated on the basis of solicitor and own-client costs being around 50% higher than standard costs, that is that approximately two-thirds only of costs recovered on a standard basis.

I know – it was my idea.

Solicitor And Own Client Hourly Rate

On a solicitor and own client assessment under the Solicitors Act 1974, it is always easier to justify basic charges than the success fee, and therefore as much of the charge as possible should be within the basic charge, which then reduces the amount of the charge which is a success fee.

It also maximizes the chances of the solicitors achieving the 50%, or 36%, or whatever, and it must be remembered that this is a cap, and not a fixed fee.

Let us take a simple example that demonstrates these two points.

The solicitor has agreed to cap all charges at 50% of damages and recovers £10,000 for the client, which obviously means that the maximum charge is £5,000.

They have done 10 hours work.

They utilize the Guideline Hourly Rates, as very many firms do.

The maximum charge to the client is as follows:

Thus, the solicitors cannot achieve a charge of 50% of the damages.

Let us assume that they take my advice and charge Guideline Hourly Rates plus 50%, which would give an hourly rate of £327.

The picture is now as follows:

As the total charges are to be capped at 50% of damages, the success fee element will be only £1,730 as follows:

The success fee is calculated as a percentage of the basic charges, and that works out at a success fee of 52.91%.

Thus the solicitor achieves the desired fee, and has the benefit of the success fee being 52.91%, rather than 100%, which would obviously be easier to justify on a Solicitors Act 1974 assessment.

Civil Costs Consultation: Budgeting And Guideline Hourly Rates

The Civil Justice Council is consulting on a wholesale revision of the civil costs regime; the Consultation Paper is here and the consultation ends at 12 noon on Friday 14 October 2022.

In the last piece I looked at pre-action costs and the interplay with fixed recoverable costs due to be extended in April 2023.

Here I look at the connected issues of Costs Budgeting and Guideline Hourly Rates, and in each case the Consultation Paper asks whether they should be abolished altogether.

Costs Budgeting

At the Civil Justice Council Costs Conference on 13 July 2022, the following questions were listed for discussion, taken directly from the Consultation Paper:

  • Is costs budgeting useful?
  • What if any changes should be made to the existing costs budgeting regime?
  • Should costs budgeting be abandoned?
  • If costs budgeting is retained, should it be on a “default on” or “default off” basis?
  • For cases that continue within the costs budgeting regime, are there any high-level changes to the procedural requirements or general approach that should be made?

The general view was that Costs Budgeting should be retained and was useful, but needed changing, and as one delegate said:

It is fine as long as it is for someone else and not me.”

The extension of fixed recoverable costs in April 2023 to virtually all civil cases valued at £100,000 or less will dramatically reduce the number of cases where budgeting applies; it does not apply to any fixed recoverable costs case.

Many thought that excluding the most high value cases – currently those over £10 million – made no sense; it was the equivalent of having a full budget for constructing a shed, but no budget at all for building a house.

The issue of incurred costs, including pre-action costs, was accepted as a major problem, and again using a building analogy was the equivalent of only preparing a budget once half the house had been built.

The consultation paper also asks whether hourly rates should be considered and whether costs management should be carried out by specialist Costs Judges and whether more training of judges is required if the present system is to be retained.

The Consultation Paper also says:

“One practical problem with costs budgeting that has been reported is the lack of consistency overall and, in particular, the differing approaches to the question of what comes first – identifying the work that needs to be done, or setting the budget with the work then being agreed within that budget.”

Guideline Hourly Rates

  • What is or should be their purpose?
  • Do or should they have a broader role than their current role as a starting point in costs

assessments?

  • What would be the wider impact of abandoning Guideline Hourly Rates?
  • Should Guideline Hourly Rates be adjusted over time and if so how?
  • Are there alternatives to the current methodology?

At the Costs Conference the point was made that Guideline Hourly Rates have only been around for about 20 years and that the Solicitors Act 1974 had to be amended to allow charging by the hour as a legitimate basis for billing a client, and that there was very little research available and almost no logical basis for the actual rates.

When I started work in 1974, there was no billing by the hour. Indeed at the Crown Court you negotiated the fee with the court clerk at the end of the case, and walked away with a government order- equivalent of a cheque – or in some cases cash! I remember walking away with a stash of cash in the company of my client who had just been acquitted of robbery; I was relieved when we went our separate ways and I returned to the office.

There is a tension between Fixed Recoverable Costs where, with the minor exception of a 12.5% London Weighting Allowance, seniority and status of the lawyer and location are irrelevant, and Guideline Hourly Rates, where they are the only variables.

Few people thought they should be abandoned, and everyone recognized that there needs to be a mechanism for uprating them in a period of higher inflation.

Failure to uprate fixed recoverable costs was cited as a reason why many people opposed their extension.

Guideline Hourly Rates, although essentially a tool for between the parties’ assessments, do give solicitors a starting point for setting the charge to their client, with many adopting a Guideline Hourly Rate plus 50% formula to reflect the old adage about expecting to recover two thirds of costs from the other side if successful.

A key issue is whether location should be of any relevance in a world of hybrid working, remote and hybrid court hearings, Microsoft Teams, Zoom and WhatsApp etc.

Why should an opponent pay for London offices and London salaries? Surely that is a classic solicitor and own client expense.

Payment by the hour obviously rewards the inefficient and less talented lawyers and incentivises lawyers not to settle. High rates for city centre firms arguably reward a poor business choice of expensive locations.

A modern, efficient firm making use of technology and lower overheads risks being punished, a key feature in the flight compensation case of

Bott & Co Solicitors Ltd v Ryanair DAC [2022] UKSC 8 (16 March 2022)

where I advised Bott & Co, the successful law firm in the Supreme Court.

The lawyer who resolves a matter satisfactorily and quickly with little work deserves a higher, not lower, fee than the one who takes years and goes to trial.

Contingency fees achieve that in that the fee is the same, but clearly the less work done, the greater the profitability to the law firm.

In fact, it is some of the lowest paid Legal Aid work, such as housing, which needs an expensive city or town centre location to be near the clients. Commercial work does not.

The old idea of benchmarking should be revisited, that is where a particular fixed fee is regarded as reasonable for a particular piece of work, and that fixed fee would take into account the “seven pillars of wisdom” in CPR 44.4(3).

My firm’s office in Wellington in the Western Cape of South Africa has 37 team members carrying out secretarial, telephone, sales, marketing and so-called backroom work. The firms who use these services should be rewarded, not punished, for lowering the cost base.

There is now very substantial interest in having English/Welsh legal work done there, thus enabling firms to do socially valuable work at lower cost and to make a profit on fixed recoverable costs work, as well as lowering costs to the client.

In an open costs Guideline Hourly Rates case, that business acumen would be punished, not rewarded.

Perhaps the most important question is the one that is not asked in the Consultation Paper:

Is there any justification at all for charging by the hour?

Time present and time past
Are both perhaps present in time future
And time future contained in time past.
If all time is eternally present
All time is unredeemable.

Four Quartets: Burnt Norton by T.S. Eliot

Indemnity Costs And Guideline Hourly Rates

In

Eurosail-UK 2007-4BL Plc & Ors v Wilmington Trust SP Services (London) Ltd & Anor [2022] EWHC 1019 (Comm)

costs were awarded on an indemnity basis and in favour of a London 1 firm with the Court accepting that it was “certainly reasonable for the applicants to instruct their corporate solicitors to deal with this case”.

The Solicitors claimed over £800 an hour for Grade A fee-earners and £257 for a Grade D fee-earner.

The Court reduced the rates to £650 and £250 respectively, accepting that it should allow “slightly in excess of the guideline hourly rates”, which are £512 and £186 respectively.

Written by kerryunderwood

September 29, 2022 at 3:12 pm

Posted in Uncategorized

THE BAR AND FIXED COSTS

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Kerry will be discussing this topic, and very many others, in his two 1-hour Zoominars at 4.00pm on Wednesday 5 October and Tuesday 11 October 2022 – recordings are available whether or not you attend.

£35 for one Zoominar; £50 for both Zoominars – plus VAT in each case- including the recordings.

As many colleagues as you like from your organization can attend at no extra cost.

Please click here to book your place for the Zoominars.

On 3 April 2023, fixed recoverable costs will be introduced for virtually all civil claims valued at £100,000 or less.

Here I look at the potential impact on the Bar, and the possible effect on the solicitor- counsel relationship, and some suggestions as to action that lawyers should take now.

I work on the premise that the continued existence of the Bar is of considerable value to small and medium-sized solicitors’ firms throughout the country and that the benefits of the Bar include:

  • specialist knowledge;
  • drafting and advocacy skills;
  • convenience;
  • a fresh pair of eyes.

The Problem

Give a solicitor £5,000 plus recoverable counsel’s fees and the solicitor will instruct counsel.

Give a solicitor £7,000 including any spend on counsel and even if counsel’s fees are only £1,000, leaving the solicitor with £6,000 rather than £5,000 as previously, the solicitor will tend to do the work in-house and not instruct counsel.

This has been the widespread experience in the existing Fixed Recoverable Costs scheme and is borne out of those practising in, for example, the Employment Tribunal where no costs are recovered.

In such hearings the percentage of solicitor advocates in far higher, even though the hearings are generally lengthier and far more complex than in most civil litigation cases where costs remain recoverable.

Even in relation to the advocacy fee, there is a problem as no fee is payable in Fixed Recoverable Costs cases if the matter is settled before the day of the trial as illustrated in

Mendes v Hochtief (UK) Construction Ltd [2016] EWHC 976 (QB) (29 April 2016),

under CPR 45.29(C) Table B a reference to “trial” is a reference to a final contested hearing.

Thus a barrister who is instructed and carries out significant preparatory work gets no fee if the matter settles other than on the day of trial.

A solicitor gets a fixed extra fee for post listing pre-trial work.

Fast Track

There is no change in relation to the existing types of personal injury cases covered by fixed costs, that is road traffic accident, employer’s liability and public liability matters, save that industrial disease cases exiting the portal will now go to fixed costs.

However, in relation to Noise Induced Hearing Loss claims, Lord Justice Jackson recommends that counsel’s fees and trial advocacy fees in such cases should be the same as those in Band 4 cases.

In principle virtually all fast track cases, that is all civil litigation under £25,000, becomes subject to Fixed Recoverable Costs. However if Lord Briggs’ proposals for the Online Court is implemented, then outside the field of personal injury nearly all such claims will be in that court, with no, or very limited, costs recovery, but that is some time away.

Band 4 is a reference to the new concept of different costs for cases of different levels of complexity.

There are four bands and in relation to Band 4 claims only, it is proposed that there be ring- fenced fees for counsel or specialist lawyers as follows:

Post-issue advice or conference –                         £1,000.00

Settling defence or defence and counterclaim –    £500.00

Band 4 in the Fast Track will include employer’s liability disease claims and any particularly complex tracked possession claims or housing disrepair claims, property disputes, professional negligence claims and other claims at the top end of the Fast Track.

Thus what determines whether a case will be in Band 4, or indeed which of the other three bands, is a combination of the type of claim and the particular complexity of any given claim.

So far as counsel are concerned, the key is to get the matter into Band 4 as that is where the additional, ring- fenced, fees set out above are payable.

In addition there are additional trial advocacy fees in the Fast Track if the claim is a Band 4 one, and these additional fees are significant.

I set out the Band 1 to 3 figures as well, by way of comparison.

Stage:1 2 34
Trial advocacy fee a. £500
b. £710
c. £1,070
d. £1,705
a. £500
b. £710
c. £1,070
d. £1,705
a. £500
b. £710
c. £1,070
d. £1,705
a. £1,380
b. £1,380
c. £1,800
d. £2,500

a = claim value up to £3,000

b = claim value £3,001 to £10,000

c = claim value £10,001 to £15,000

d = claim value £15,001 to £25,000.

The Fast Track remains limited to one day trials.

In relation to Noise Induced Hearing Loss claims Lord Justice Jackson had this to say:

“4.3 Counsel’s fees and trial advocacy fees. The CJC [Civil Justice Council] working group did not reach full agreement on these matters. I have considered the relevant material and the rival submissions made within the working group. I recommend that counsel’s fees and trial advocacy fees in NIHL cases should be the same as those which I propose for ‘Band 4’ cases in the next section of this chapter. Almost all NIHL claims are low value. So, as set out below, the trial advocacy fee will generally be £1,380.” (Page 84).

Counsel’s Fees Generally

As with solicitors, there is no variation on the fee depending on the seniority of counsel and whether junior counsel or leading counsel are involved.

If it were otherwise, this would not be a truly fixed costs scheme as if there are different fixed fees for different grades of fee earner and seniority of counsel, then that opens up a can of worms in that the paying party will always be able to argue that a more junior level of fee earner, or a less experienced barrister, should have been engaged on the work.

Arguments about the level of fee earner are amongst the most common disputes in detailed assessments and indeed it is rare to see a case where the paying party is not alleging that a lower grade fee earner should have been used.

In fact the extra amounts for more senior fee earners are relatively low anyway.

A blended rate, taking that into account different levels of fee earners, but resulting in a fixed cost, whatever the seniority of the lawyer, benefits better lawyers and will tend to benefit more experienced lawyers.

This is because an experienced lawyer will generally be able to deal with work and make decisions in far less time and will gain a far greater advantage than the 14% extra or whatever.

It is the classic conundrum that I pose in my lectures.

A solicitor rings a barrister at 2.00pm with a query and the barrister does not know the answer and says she will look it up.

She does so , takes one hour to do so, and then telephones the solicitor with the answer and charges £200.

By coincidence, as the barrister put the phone down, another solicitor rings with the same query.

Does the barrister:

  • give the answer there and then and tell the solicitor that it is not worth preparing a fee note;
  • tell the solicitor that she will research the matter and get back and then subsequently telephone and charge £200 for the advice; or
  • tell the solicitor that she knows the answer and the fee will be £250, the rationale for the higher fee being that she is now a better lawyer than she was an hour ago as she knows the point without the need to look it up.

In other words, are we being paid for time or knowledge?

Lord Justice Jackson dealt with the principle of counsel’s fees by saying:

“5.8 Counsel’s fees. Many of the written submissions and many speakers at the seminars maintain that fees should be specifically ring fenced for counsel. They put forward two arguments with equal vigour: (i) Ring fencing is necessary for the protection of the junior Bar, which is very much in the public interest. (ii) Counsel’s specialist input at an early stage is beneficial for the client and for the efficient conduct of the litigation. Professor Richard Disney (one of my 14 assessors) has, with good reason, questioned the validity of the first argument. I do not see how I can recommend any reform because it is necessary to ‘protect’ one part of a profession. The professions exist to serve the public, not vice versa.  It must be for the professions to organise themselves in whatever way is necessary to protect younger practitioners.  The second argument, however, does have force in relation to the more complex fast track cases.

5.9 Does that mean ring fencing for barristers alone? No. Very often barristers will do the ring-fenced work and receive the ring-fenced fee.  But on occasions the proper person to do the work and receive the ring-fenced fee may be a solicitor, for example the intended trial advocate. On some occasions the proper person to do the ring-fenced work and receive the ring-fenced fee may be a fellow of the Chartered Institute of Legal Executives with appropriate expertise. I shall use the phrase “counsel or specialist lawyer” to describe all such individuals.

5.10 In relation to Bands 1, 2 and 3 (where there is currently very little ring fencing of fees for counsel) I recommend no change to the present rules, essentially for the reasons set out in chapter 15 of my Final Report.  It is for solicitors to decide whether to do items of pre-trial

5.11 The mediated NIHL agreement provides that £500 be ring-fenced for settling the particulars of claim. I recommend that this should apply to all Band 4 cases. The mediated NIHL agreement also provides that £1,280 be paid for restoring a company to the register.  That includes both preparatory work and any necessary court appearance.  This should apply in both NIHL and Band 4 cases. The mediated NIHL agreement recommends that other counsel fees should be recovered on top of the FRC, if justified. In my view that approach is too uncertain. I recommend that in NIHL and Band 4 cases separate fees should be recovered in respect of any of the following items done by counsel or specialist lawyers:

Post-issue advice or conference                       £1,000

Settling defence or defence and counterclaim  £500

Solicitors may well choose to instruct counsel or specialist lawyers in respect of other matters, but the fees for that other work should not be recoverable as an addition to the monies set out in Tables 5.1 and 5.2.

5.12 Trial advocacy fee. The NIHL working group accepted that in NIHL cases the trial advocacy fees should be higher, but they could not agree on a figure.  Having considered the rival arguments, I recommend the trial advocacy fee should be increased as follows for both Band 4 and NIHL cases:

(a)  Claim value up to £3,000                      Trial advocacy fee £1,380

(b)  Claim value £3,001 to £10,000             Trial advocacy fee £1,380

(c)  Claim value £10,001 to £15,000           Trial advocacy fee £1,800

(d)  Claim value £15,001 to £25,000           Trial advocacy fee £2,500

CPR rule 45.39, which provides some flexibility in respect of fast track trial costs will continue to apply.” (Pages 86 & 87)

Intermediate Track

This proposed new Intermediate Track will in fact be kept within the Fast Track, but subject to separate rules and will cover claims between £25,000.00 and £100,000.00 and will be subject to a streamlined procedure. For simplicity’s sake here, I will continue to refer to it as the Intermediate Track.

Page 105 of his report LJ Jackson says:

“5.2 Ring fencing fees for counsel. Many practitioners, both solicitors and barristers, have urged the importance of ring fencing fees for counsel. The involvement of counsel at an early stage, both in advising and drafting, brings substantial benefits. Independent counsel bringing a fresh eye to the case can focus the litigation and sometimes bring about settlement. On the other hand, the rules cannot insist upon the use of counsel. Many other specialist lawyers bring the same benefits. In my view, for the reasons set out in chapter 5, the best course is to specify fees for items of work which are to be done by counsel or specialist lawyers.” (Page 105)

I was one of those who urged upon Lord Justice Jackson the importance of ring- fencing fees for counsel, as I believe the continued existence of the Bar is valuable to maintain the network of independent firms of solicitors up and down the country.

That concept has been accepted by LJ Jackson and the relevant figures are in table 7.1 on pages 106 and 107 of his report.

Thus there is a counsel/specialist lawyer ring fenced fee for drafting Statements of Case and/or advising, if so instructed, and these are as follows:

Bands 1 and 2 – £1,750.00

Bands 3 and 4 – £2,000.00, but £3,000.00 if there is a counterclaim and defence to counterclaim.

That is Stage 2.

At Stage 7 there is provision for a further ring fenced fee for advising in writing or in conference, if instructed and the fees are:

Band 1: £1,250.00

Band 2: £1,500.00

Band 3: £2,000.00

Band 4: £2,500.00 per day.

There is further encouragement for solicitors to instruct counsel in that there is a Fixed Recoverable Fee for anyone from the solicitor’s office attending, whatever the level of fee earner, and those fees are:

Band 1: £500.00 per day

Band 2: £750.00 per day

Band 3: £1,000.00 per day

Band 4: £1,250.00 per day.

If the attendance is for half a day or less, then these fees are halved.

The actual advocacy and related matters are set out in Stages 10 to 15 of table 7.1 as follows:

The advocacy fee for second and subsequent days is halved if the attendance is for half a day or less.

That does not apply to the first day, when the full fee is payable in any event.

Fee for counsel if matter settles

Under Lord Justice Jackson’s proposals, which have been accepted by the Government almost in full, there is no additional fee for counsel if the matter settles, that is preparation for a trial that does not take place.

There are additional fixed recoverable costs for the period between 14 days before trial, and up to trial, and these are Stages S6, and S8, and, for example, in a Band 4 that claim the fixed fee rises by £3,650 and the percentage of damages is 22% instead of 18%.

Thus, in a £100,000 claim, the fixed recoverable costs jump by £7,650.

Solicitors are of course free to instruct  counsel, and pay them, for preparing for trial, but beyond the figures set out above, which go to the solicitor, there is no additional fixed recoverable costs.

Having said that, Stage S7, which obviously comes between Stage S6 and Stage S8, is a ring-fenced counsel’s fee for advising in writing or in conference (if instructed).

I would amend the scheme to provide as follows:

  • 25% of the fixed day one advocacy fee if the matter settles between 42 days and 21 days before trial;
  • 50% of the fixed day one advocacy fee if it settles between 21 days and seven days before the trial;
  • 75% of the fixed day one advocacy fee if it settles within seven days of trial.

That is fair to counsel, and clear and certain, and encourages relatively early instruction of counsel by solicitors, and if there is to be settlement then this encourages it earlier than at the doors of the court, and the paying party saves money because, if settled more than 14 days before trial, they are still in Stage S5 and not Stage 6 or 8.

This mirrors the old fixed recoverable success fee scheme, and whatever one thinks of the principle of recoverability of success fees, that aspect worked well.

Another feature of the existing scheme, which has been maintained in the extended scheme, is that the advocacy fee is the same, whether it is a full contested trial on liability, causation, contributory negligence and quantum, or merely, for example, a trial on quantum.

In the fast track, where currently trials cannot last more than one day, it may be that the swings and roundabouts approach, that is taking the rough with the smooth, works.

That is not necessarily the case in more complex trials.

This is partly reflected in the fact that there are additional advocacy fees for second and subsequent days, and it could be argued that the fixed advocacy fee for day one is sufficient in any event.

However, to encourage the admission of liability where appropriate, I would increase the fixed day one advocacy by 50% where liability is not admitted at least 21 days before trial.

Seniority of counsel irrelevant

Throughout the report, Lord Justice Jackson steers away from anything that will lead to a replay of the arguments as to what level of fee earner should have been utilised.

Thus the report specifically states that in table 7.1 “solicitor” includes a representative of the solicitor’s firm, in the context of attendance of solicitor at trial, when not appearing as the advocate.

Likewise the advocacy fee, with its many variations, is nevertheless fixed, irrespective of the seniority of the barrister or solicitor appearing at trial or at the mediation or settlement hearing or whatever.

Comment

This aspect of Lord Justice Jackson’s report should be warmly welcomed by the Bar, as well as by solicitors who depend on the Bar in order to carry out litigation, especially advocacy.

Lord Justice Jackson has very clearly listened to those of us who made these points and his proposals are different from his initial thoughts a year or so earlier when considering extended Fixed Recoverable Costs.

Thus all Intermediate Track claims, that is claims valued at between £25,000.00 and £100,000.00, have elements of ring- fenced fees for counsel, and the advocacy fees should work as well.

It is now up to the Bar, as well as solicitors instructing barristers, to ensure that fixed costs work for them.

The alternative is that solicitors will increasingly carry out fixed costs work themselves.

Ring fencing of counsel’s fees in the Fast Track

Counsel’s fees 

There is an element of ring fencing counsel’s fees in the Fast Track.

This applies to matters in Complexity Band 4, the details of which are set out above.

These fees are as follows:

Post-issue advice or conference –                                      £1,000.00

Settling defence or defence and counterclaim –                 £500.00.

Although I refer to the ring- fencing of counsel’s fees, such a fee is also payable to a specialist lawyer instructed by the solicitors.

This wording exists in the current rules in relation to the additional fee of £150.00 payable if the advice of counsel or a specialist lawyer is required to advise on quantum in a claim valued at over £10,000.00.

It is still not clear whether a specialist lawyer can be someone else in the same firm of solicitors, or has to be an outside lawyer.

For an additional fee of £150.00 under the current scheme, no one got too concerned about this.

However with potential additional fees throughout the case of £1,500.00, this should be clarified.

If one cannot instruct another lawyer in the same firm, then there is nothing to stop firms of solicitors having mutual arrangements whereby they refer these elements of work to each other on their cases.

There is nothing wrong with that – on of the reasons for instructing someone else is an independent view and a fresh pair of eyes.

In relation to what is a specialist lawyer Lord Justice Jackson says this:

“Does that mean ring fencing for barristers alone? No. Very often barristers will do the ring-fenced work and receive the ring-fenced fee. But on occasions the proper person to do the work and receive the ring-fenced fee may be a solicitor, for example the intended trial advocate. On some occasions the proper person to do the ring-fenced work and receive the ring-fenced fee may be a fellow of the Chartered Institute of Legal Executives with appropriate expertise. I shall use the phrase “counsel or specialist lawyer” to describe all such individuals.”

That is still not clear as to whether it can be a specialist lawyer in the same firm, but it appears that certainly a solicitor trial advocate in the same firm could be instructed.

This is potentially significant for solicitors, especially as the Band 4 advocacy fee is very substantially higher than the advocacy fee for Complexity Bands 1 to 3 as seen in the above table.

This may prove to be something of a doubled edged sword for counsel. The significant extra fees available may encourage firms of solicitors to engage and develop solicitor advocates to do this work and earn these extra fees whilst the routine preparation work is done by more junior staff.

This model fits well as the same fee is paid throughout the Fixed Costs Regime, whoever the work is performed by.

Thus a model of a junior lawyer preparing the case and taking advice from a more senior solicitor advocate within the firm as and when necessary, being paid for that advice, as well as any trial advocacy, may be an attractive one.

See below for a worked through Intermediate Track case.

Can the solicitor pay counsel less than the fixed cost?

The short answer is “yes” in that if solicitor and counsel agree a lower fee than the fixed recoverable costs fee, and do not seek to charge that from the other side, then there is no problem.

However, there is no point whatsoever in doing that.

It may be the case that counsel is not prepared to work on a No Win No Fee basis, but is prepared to accept a fee which is lower than the ring fenced fixed recoverable advocacy fee or advice fee or whatever.

The answer there is for solicitor and counsel to have a No Win Lower Fee, whereby the lower fee is payable in any event and the full recoverable fee is payable in the event of success.

This limits the solicitor’s/client’s liability if the case is lost but means that the indemnity principle causes no problems if the case is won and obviously then everyone will want to recover the full fixed cost from the other side.

In

Nizami v Butt [2006] EWHC 159 (QB)

the court held that the indemnity principle did not apply in fixed costs cases.

However, until case law develops, I would not want to rely on that in a situation where there can be no liability for the client and/or the solicitor to pay counsel the full recoverable fixed fee, and as set out above this problem is easily avoided by having a solicitor and counsel No Win Lower Fee Agreement.

Success fee

This does not mean that the total charge to the client is limited to the fixed recoverable costs.

In a No Win Lower Fee Agreement there can still be a success fee on the normal charge – see

Gloucestershire County Council v Evans & Others [2008] EWCA Civ 21

This makes sense as in a No Win Lower Fee the fee on defeat is zero and the fee on success is the solicitor and client rate, but with an uplift to reflect success.

Intermediate Track – an issue magnified

Let us take an Intermediate Track Band 4 advocacy fee for a three day case.

The fixed recoverable costs for advocacy are £10,000.00 – see Stages 10 and Stages 11 of the matrix.

Solicitor and counsel could have a No Win Lower Fee Agreement whereby counsel is paid say £5,000.00 on defeat,  that is half the recoverable fixed costs.

The ordinary rate in the agreement could be the fixed recoverable costs sum of £10,000.00, but I will come back to that point.

There could be a 50% success fee for counsel to reflect the fact that s/he is only receiving half of the fee if the case is lost.

Thus in the event of success counsel would receive £15,000.00, of which £10,000.00 would be recoverable from the other side and £5,000.00 payable by counsel’s successful client.

There are endless variations, which I will deal with on another occasion, but the main point to note is that the success fee cannot exceed 100% of the ordinary rates.

It is that ordinary rate, in this case £10,000.00 which forms the basis of the maximum 100% success fee.

It is not the lower fee of £5,000.00 that forms the base fee on which the success fee is based.

This appears to be an illegal 200% success fee as obviously £15,000.00 represents a 200% uplift on £5,000.00.

That is where the logic of Gloucestershire County Council v Evans comes in – normally the lower fee would be zero and obviously any percentage uplift on zero is zero.

Thus it is unquestionably always the case that the normal fee, in this case £10,000.00, forms the base fee on which the maximum, or indeed any other, uplift is calculated.

Part 36

I refer above to the ordinary base fee in the agreement , that is not the discounted fee, being £10,000.00 as that would be the fixed recoverable costs in this case.

However, by definition, one would hope that if a matter is going to trial both parties will have made Part 36 offers. The Defendant may choose not to if they think the case has no merit, but a Claimant should always have made such an offer, and indeed risks being punished in costs for not doing so.

Lord Justice Jackson proposes that the concept of indemnity costs in Part 36 disappears in fixed costs cases and be replaced by a fixed percentage uplift.

That was indeed my submission to Lord Justice Jackson.

He said that that uplift should be either 30%, or 40%, and unsurprisingly the government has gone for 35%.

That would obviously give a recoverable fee of £13,500.00, and not £10,000.00, in a Band 4 three day Intermediate Track trial where the Claimant wins and has matched or beaten its Part 36 offer.

Irrespective of Nizami v Butt, my view is that if the standard fee in the agreement is £10,000.00 then that is the limit of recovery.

This is unexplored territory, as currently in a fixed costs case beating a Part 36 offer escapes fixed costs and triggers indemnity costs and there is no doubt that Nizami v Butt does not apply when open, indemnity costs are awarded.

However, the whole point of the 35% uplift, is that it will be fixed and forms part of the Fixed Costs regime, and arguably Nizami v Butt saves the day for the Claimant in such a situation.

However, there is no point in taking the risk.

Thus in this scenario, that is a three day Intermediate Track Band 4 trial, the client/solicitor/counsel agreement should provide for a fee of £13,500.00, so as to satisfy the indemnity principle if the fixed 35% Part 36 uplift is achieved.

Subject to the success fee not exceeding 100% of those base costs of £13,500.00, client and solicitor and counsel are free to agree whatever they want.

A properly drawn Conditional Fee Agreement can provide that in any event the total charged to the client is limited to what is recovered from the other side, or more likely that the total charged to the client is limited to what is recovered from the other side plus a percentage of damages.

The effect of this is that if the Part 36 offer that the Claimant has made is not matched or beaten, that the Claimant still wins and beats any Defendant’s Part 36 offer, then although the agreement provides for payment of £13,500 fee to counsel, the parties can agree that that will only be £10,000 in those circumstances.

As we have seen counsel’s fees are ring-fenced for certain pieces of work, and not just advocacy.

In addition to the fixed 35% enhancement for matching or beating one’s own Part 36 offer, I would go further and have an additional ring-fenced fee for counsel where a party has matched or beaten its own Part 36 offer.

From the defendant’s point of view a well-pitched Part 36 offer puts the claimant at risk of having to pay post-expiry cost even if successful and in personal injury cases defeats the protection of Qualified One-Way Costs Shifting.

Early settlement in appropriate cases is the key to success in Fixed Recoverable Costs regime, for claimants and defendants, not forgetting the clients.

To encourage the instruction of Counsel in relation to this key aspect of any case I propose that there be a fee of 3% of the value of the other side’s offer.

Thus, if a defendant offers £100,000 and the claimant ultimately wins then counsel’s fee is £3,000.

If a claimant offers £100,000 and matches or beats that offer, then counsel receives £3,000.

In relation to defendant’s offers, I propose that if a claimant fails to match or beat that offer, and this is liable for costs even though they have won, then counsel’s fee for advising on what turned out to be a correct offer, again should be 3% of the value of the claim.

This gives both parties a strong incentive to make a well-pitched Part 36 offer and discourages the practice of defendants making ever increasing multiple offers. If they do so, then the claimant gets 3% of the value of each offer it beats.

Although this may sound a little complicated it imports certainty. At the end of the case, it will be clear precisely what fee is due and there will be no need for assessment.

Personal injury

In personal injury cases there is an additional requirement that the success fee should not exceed 25% of damages, and there are further restrictions on the damages that form the Allowed Damages Pool, which is the fund subject to the 25% charge.

Solicitor paying counsel less than fixed recoverable costs and keeping the change

Adopting the scenario above, could a solicitor agree with counsel a fee of say, £5,000.00 and not £10,000.00 but still recover the full £10,000.00 from the losing party as fixed recoverable advocacy costs?

Yes, in my view, provided the agreements are prepared properly.

Thus, an overall charge to the client of say fixed recoverable costs plus 30% of damages, with the solicitor to discharge any counsel’s fees or solicitor agent fees or whatever, does allow the solicitor to instruct counsel on whatever basis a solicitor and counsel agree.

This principle has been established in a number of cases, for example in

Crane v Canons Leisure Centre [2007] EWCA Civ 1352

and Stringer v Copley in relation to outsourcing of work, that is that in principle there is no difference between a solicitor making profit on outsourced work as compared with making a profit on work done by an assist solicitor or trainee solicitor or whatever.

What I think is not permissible is to present a bill stating that counsel’s fee of £10,000 has been incurred if in fact counsel has only been paid £5,000.

However, the point of fixed costs, is that normally no bill is sent to the other side as the costs are fixed – that is the point!

Whether counsel are prepared to agree such an agreement is a market issue.

This comes back to the point raised above – if solicitors say “Well these ring fenced fees are good – I think I will instruct a specialist lawyer in my own firm and have the advocacy done in my own firm unless counsel will do it for a lower fee”, then the Bar has a problem.

Lawyer and own client fees

Nothing in Fixed Recoverable Costs restricts the ability of lawyers to charge their clients more than Fixed Recoverable Costs, subject to compliance with section 74(3) of the County Courts Act 1974.

However, certainty of what sum is to be recovered from the other side in the event of success is bound to influence lawyer and own client costs and the additional  unrecovered charges are likely to be limited by reference to a percentage of damages.

This is almost universal in personal injury fixed costs cases.

Counsel and solicitor on a paid basis win or lose and receive no success fee?

Will counsel be instructed on a no win lower fee basis with a partial success fee?

Will counsel be instructed on a no win no fee basis but with a full success fee? Is so, how is that success fee calculated?

  • Half of the solicitor’s success?
  • Double counsel’s normal fee for doing that work?

There are endless variations but solicitors and barristers need to sit down now and talk about these matters. As people who get paid for talking we do not talk to each other nearly enough.

3 April 2023 will soon be upon us.

Success fees for the Bar

As I understand it, the general position now that success fees are not recoverable from the losing party is that counsel are often instructed on a No Win No Fee basis but do not get a success fee in the event of winning.

It is not for me to comment on the rights and wrongs of that – again it is a question of market forces.

Talk!

What seems to me of crucial importance now is that barristers and solicitors start talking to each other to make arrangements for when these dramatic changes come in on 3 April 2023.

Make no mistake – there are cases in solicitors’ offices now which will be subject to the new regime.

The letter of claim must state which track and complexity band the claimant thinks the case should be in. Defendants must do the same in the letter of response.

If the case settles before issue or before allocation, then the band allocation decision will fall to the judge assessing costs if there is no agreement between the parties.

Thus counsel’s fee will be determined by the letter of claim and response, and so the bar may care to try and become involved at that stage in advising on the appropriate track and complexity band.

Written by kerryunderwood

September 29, 2022 at 1:14 pm

Posted in Uncategorized

10 September 2022 is World Suicide Prevention Day

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Every year on World Suicide Prevention Day organisations and communities around the world come together to raise awareness of how we can create a world where fewer people die by suicide.

In 2020, 4,912 deaths by suicide were registered in England. 77 were in Hertfordshire. Every life lost to suicide is a tragedy and has a devastating effect on family, friends, colleagues, and the local community.

And we know that suicide is preventable, it’s not inevitable.

Samaritans are campaigning with over 70 other suicide prevention and mental health groups under the National Suicide Prevention Alliance to ask governments in the UK and Ireland to make suicide prevention a priority.

We also raise awareness about Samaritans and provide tips on how to take care of yourself and others better. This World Suicide Prevention Day, if you’re worried someone might be experiencing suicidal thoughts – we encourage you to ask them directly.

Asking someone if they’re suicidal won’t make things worse. Evidence shows it could protect them.

If someone is feeling suicidal, it might be hard to get through to them. They might be distant or distracted or feel disconnected from the world and their own emotions. They might not respond right away. But asking someone directly if they’re having suicidal thoughts can give them permission to tell you how they feel.

If someone does let you know that they are having suicidal thoughts, always take them seriously. You don’t have to be an expert, just being there to listen and showing you care can help them work through what’s going on. Let them know they’re not a burden and there’s always someone they can turn to – whether it’s a family member or friend, or a 24/7 helpline like Samaritans.

It’s OK to ask about suicidal thoughts. It could save a life.

Written by kerryunderwood

September 9, 2022 at 2:34 pm

Posted in Uncategorized

Private Client Solicitor / Legal Executive

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Quality without compromise

A fantastic opportunity has arisen for a Private Client Solicitor or Legal Executive to join our independent law firm which has been established for over 30 years.

The role

As the private client solicitor or Legal Executive, you will:

  • Be joining our expanding 30 strong team
  • Have autonomy and authority to build your own department, including caseload and staff both in South Africa and the UK, whilst being given full support to develop your skills and talent to the maximum
  • Manage our existing private client caseload which includes but is not limited to, wills, probate, trusts, tax planning, guardianship, lasting powers of attorney and court of protection. This includes our existing client base, many of whom are high-net worth and/or high profile individuals
  • Have a dedicated Legal Secretary assisting you from our office in Wellington, South Africa
  • Have administrative (including file opening, typing, drafting and legal research) and reception support from our team in Wellington, South Africa
  • Offer exceptional client care, services and expertise to match the firm’s high standards
  • Create lasting relationships with clients built on trust, empathy, and care
  • Be confident in promoting yourself and the business through attending networking events, local marketing and business development.

Who are we looking for?

This job is suited to a passionate and ambitious lawyer

Essential skills for this role include:

  • Ability to manage a varied caseload with minimal supervision
  • Attention to detail and excellent time management
  • Computer literate
  • Clear written and oral communication skills
  • Genuine, caring and attentive relationship skills

This is a fantastic opportunity to join a prestigious, innovative and well respected firm.

Added extras and benefits

  • Flexibility regarding working arrangements
  • 25 days holiday plus one additional day’s holiday for your birthday and an additional day’s holiday after you have worked with us for a continuous period of two-years.
  • Family friendly firm that supports working parents
  • Healthy approach to work/life balance
  • Opportunities to work on reputable legal blogs and articles
  • Opportunities to publish writing and books in your own name and/or in connection with the firm
  • Opportunities to attend and support legal events and local, regional and national sporting and charity events
  • Opportunity to visit South Africa

Salary

£35,000+ according to experience

About us

We are an independent law firm with offices in Bovingdon in Hertfordshire and Wellington, just outside Cape Town, South Africa.  The staff in our Wellington office provide full administrative support to the Bovingdon office, including dealing with all typing of digital dictation for the fee earners, as well as providing offshoring services to a number of renowned solicitors firms across the UK.

We have strong links with South Africa and much of our work is South African related and we have had a base there for 22 years.

Kerry Underwood is Senior Partner of Underwoods Solicitors and is the acknowledged expert on funding, costs, legal systems, client care, marketing and advertising of legal practices. His books on these subjects are considered the standard works. Kerry has written hundreds of articles on legal topics and is a regular contributor to Practical Law He appears regularly on radio and is frequently consulted by senior politicians and senior members of the Judiciary.

We act for a wide range of individuals including actors, sportsmen and sportswomen, judges and Members of Parliament as well as organisations large and small, national and international and sports clubs. We are often involved in advising governments, especially of commonwealth countries.

Sir Mike Penning MP PC, former Justice, Police and Armed Forces Minister, is a Non-Executive Director.

Leah Waller is a Consultant Solicitor that completed her training with us and now manages our employment law department as well as the HR for staff in the UK and South Africa.

The firm plays an important role in the community in both England and South Africa and has close links through support of the local sports teams as well as supporting local schools for special needs children. We are involved in several charities including the Lord’s Taverners and Lords Taverners South Africa which provide access to sport for disabled and disadvantaged children.

How to apply

To apply please send CV and covering email to leah.waller@lawabroad.co.uk / kerry.underwood@lawabroad.co.uk by Friday 7 October 2022.

Candidates will be invited for interview week commencing 10 October 2022.

Written by kerryunderwood

September 6, 2022 at 4:56 pm

Posted in Uncategorized

INDEMNITY PRINCIPLE REQUIRES LIABILITY, NOT PAYMENT

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The indemnity principle means that a client cannot recover from the other side a sum greater than they are liable to pay their own lawyers, and this acts as an absolute cap on the costs liability of the other side.

For example, if solicitor and client had agreed a fixed fee at £300, but six hours work is done and the guideline hourly rate is £200 per hour, the maximum recovery from the other side is £300, and not £1,200.

However, the courts have always taken a pragmatic view of the indemnity principle and have made it clear that there has to be a liability for costs, and no part of the indemnity principle requires that the client does pay those costs, or even that the client is able to pay them.

This was recently re-affirmed by the Senior Court’s Cost Office in

Balaj & Ors v Secretary of State for the Home Department [2022] EWHC 1627 (SCCO).

“32. From the N260 submitted by AR, it appears that 48 minutes have been spent on letters/emails to ‘client’ and 2 hours and 54 minutes on the telephone. That would equate to one, routine letter each, and something like 22 minutes each on the telephone if indeed the calls and letters were to the Claimants. The Claimants are vulnerable clients whose right to enter or to stay in the UK was under threat (hence AR’s involvement) and the prospect of them having funds to pay £4,010.98 each (one-eighth of the sum in the N260) is about the same as the prospect of, say, Ms Ndreu being in a position to pay the £24,188.16 main action costs (of her successful challenge to her unlawful detention at the behest of the Defendant) out of her own pocket.”

“33. As much as it may be to the chagrin of the Defendant, that does not mean that there has been a breach of the indemnity principle. The assessed Bill in Ndreu has been endorsed in manuscript by the Costs Officer to show that the retainer has been viewed and that there is no breach. Having contracted with the Claimants to charge £409 (or £490) per hour for ZJ’s services, AR is entitled to certify its Bills to state that they do not seek more than the Claimants are LIABLE to pay; it does not say (and is not required to say) that the Claimants HAVE paid, and if AR is prepared to walk away for what it recovers from the Defendant, and not to seek any, let alone the entire, shortfall, that is entirely normal.”

“34. If AR seek to pursue the Claimants personally for the shortfall between what the Court has found reasonable between the parties, and their contract rate, they are entitled to try. If they do, recent case law on ‘informed consent’ may well come into play given the significant gap between reasonable costs and the costs charged by AR, in every case reviewed by me. However, that is not a matter for the Defendant’s input in between-the-parties assessment proceedings.”

Written by kerryunderwood

September 2, 2022 at 9:16 am

Posted in Uncategorized

COURTS RESTRICT APPLICATION OF THE SOLICITORS ACT 1974

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In two recent cases the Queen’s Bench Division of the High Court has adopted a restrictive approach to the power of the courts on a solicitor and own client assessment under Section 70 of the Solicitors Act 1974.

Misconduct Under CPR 44.11 Does Not Apply To Solicitors Act 1974 Assessments

In

John Poyser & Co Ltd v Spencer [2022] EWHC 1678 (QB)

the Queen’s Bench Division of the High Court held that on a solicitor and own client assessment under Section 70 of the Solicitors Act 1974, the Court had no jurisdiction in relation to CPR 44.11, which allows a court to disallow costs, or order a party or legal representative to pay costs, due to misconduct.

The High Court was hearing an appeal by a firm of solicitors against a decision by a Costs Judge to reduce the bill by 75% under CPR 44.11 for misconduct, the alleged misconduct being a failure to account fully to the client for money paid on account, and for charging for dealing with a complaint, and for charging excessive hourly rates.

The background to the case was the Solicitors Act 1974 assessment of the bill in relation to proceedings concerning a disputed will.

The High Court held that the Costs Judge had erred, and was critical of many aspects of the decision of the Costs Judge, and doubted whether there had been any misconduct that would bring CPR 44.11 into play, even if there was jurisdiction so to do, which there was not.

CPR 44.11 concerned conduct in connection with a summary or detailed assessment, and/or proceedings before those, and a solicitor and own client assessment was neither a summary nor detailed assessment.

In a Solicitors Act 1974 case the costs claimed could not be summarily assessed and a solicitor and own client assessment under Section 70 of the Act, and CPR 46.9 – 10, was not a detailed assessment within the meaning of CPR 44.1(1) as being under CPR 47.

Even if the procedure for solicitor and own client assessments incorporated some elements of CPR 47, most of that rule had no application.

There were also policy and historical reasons, set out at great length in the judgment here, supporting this conclusion and, in

Alpha Rock Solicitors v Alade [2015] EWCA Civ 685

there had been no suggestion that the sanctions on a solicitor for serious misconduct included exercise of the powers under CPR 44.11

The Court here further held that CPR 44.4, the factors to be taken into account in deciding the amount of costs, did not apply to Section 70 of the Solicitors Act 1974 assessments, where the function of the Court was to decide whether costs incurred were reasonable in amount against the backdrop of the retainer agreed with the client.

That backdrop required the special procedure rules in CPR 46.9 headed “Basis of detailed assessment of solicitor and client costs”. 

Solicitors Act 1974: Section 70: Court Cannot Consider Setting Aside Costs Agreement

In

Lisa Jones v Richard Slade and Company Ltd [2022] EWHC 1968 (QB)

the Queen’s Bench Division of the High Court allowed the appeal of the defendant firm of solicitors against the decision of the Costs Judge, who had refused to strike out the claimant client’s application to set aside a costs agreement between the parties.

The Claimant argued that she had only entered into the agreement due to undue influence or economic duress and the law firm applied, under CPR 3.4(2), to have that part of the claim struck out on the ground that it fell outside the Court’s jurisdiction under Section 70 of the Solicitors Act 1974.

The High Court held that the Costs Judge had been right not to dismiss the claim under CPR 3.4(2) as that applied only to a “statement of case” and not to points of claim.

Nevertheless, the law firm’s application raised an important point concerning the Court’s jurisdiction, which should be resolved, and if the application was well-founded which the High Court held that it was, then strike out would be achieved under CPR 3.1(2) (f) or (k).

The client had sought an assessment of bills totalling £22,090 arguing that she was induced to compromise her claim, because otherwise she would be “exposed to a rather greater costs liability” to the firm.

The High Court said that “the contours of permissible enquiry under Section 70 are not sharply defined” saying that there was a limit, and that the difficulty was locating where, precisely, that limit lies.

The Court said that it did not “consider that there is anything within Section 70 that permits the court to embark on what is in effect a freestanding enquiry into the question of whether the agreement should be set aside on grounds of undue influence. That involves the exercise of a distinct equitable jurisdiction which forms no part of an assessment of costs”.

The Costs Judge had looked at the matter the other way round and had held that there was nothing in Section 70 that excluded the power to carry out such an enquiry, but the High Court said that the fact that something is not positively excluded does not mean that it is, by omission, permitted.

The claimant was effectively asking the Court to exercise an equitable jurisdiction which it did not have.

The High Court was assisted by the principled approach to the limits of Section 70 adopted in professional negligence cases, which show that wholesale allegations of professional negligence may not be determined, as they were not relevant to the costs assessments.

However, discrete and contained allegations of negligence, that is localized negligence, or a breach of fiduciary duty, may be relevant when assessing whether the particular costs were reasonably incurred.

The Court gave an example of localized negligence as follows:

“41.. If, for example, a solicitor submits a witness statement late, and costs are incurred in securing an extension of time, then it may be relevant to enquire whether the delay was the fault of the client, or the solicitor. If the former, then the costs of securing an extension of time are likely to be reasonably incurred. If the latter, then the client might succeed in showing that they were unreasonably incurred, in that they were due to the solicitor’s negligence. In that type of case, the issue of negligence is closely tied to the exercise that the court is required to undertake – the assessment of the costs’ bill. Resolving where the fault lies is a necessary part of assessing the costs. Conversely, if a claim is issued after the expiry of the limitation period, and is, for that reason, ultimately unsuccessful, the assessment of each item of costs that was incurred during the case does not depend on whether the solicitor was negligent in issuing the claim late. Such a case of “wholesale” negligence is irrelevant to the assessment of costs.”

The fact that Parliament had given specific power to set aside non-contentious business agreements and contentious business agreements under Section 57(2) and 61(2)(b) respectively of the same Act strongly suggested that there was no power in Section 70 to set aside agreements generally.

The Court needed to look at what the statute positively allows, not that which it did not specifically prohibit.

Although more generalized allegations are less likely to fall within the scope of Section 70, there is jurisdiction to address issues going to the heart of the retainer, where necessary, as part of the costs assessment, and thus, here the Court had jurisdiction to determine whether the agreement precluded a Section 70 assessment, as that was necessary to embark upon the assessment, or not.

Here the Court set out in considerable detail the history of the assessment of bills and the procedure, and it is a very helpful judgment, worth reading in full.

This is an important judgment as the High Court rejected the idea that the alternative to dealing with the matter under Section 70 of the Solicitors Act 1974 was a Chancery Division action under Part 7.

On at least three occasions the High Court here pointed out that this could, and should, be dealt with within the non-costs bearing Small Claims Court jurisdiction.

It is time for Solicitors Act 1974 assessments to follow the normal costs rules, that is any claim valued at under £10,000 should be non-costs bearing, and any claim valued at £100,000 or less should be subject to fixed recoverable costs.

Written by kerryunderwood

August 31, 2022 at 11:17 am

Posted in Uncategorized

FIXED RECOVERABLE COSTS AGREEMENTS

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There have been two recent cases, one in the Court of Appeal, and one on appeal to Central London County Court, which looked at the position where in cases which may, or may not, have been subject to fixed recoverable costs, the parties had apparently made a different arrangement.

It is well established that the parties are free to contract out of fixed recoverable costs, and I deal with this below.

It is logically also the case that parties are free to contract into fixed recoverable costs, which is what happened in the second case that I report below.

These matters become of much greater significance in April 2023, when fixed recoverable costs will be extended to virtually all civil litigation claims valued at £100,000 or less.

No Fixed Costs Where Detailed Assessment Agreed

In

Doyle v M&D Foundations & Building Services Ltd [2022] EWCA Civ 927

the Court of Appeal upheld the decision of the two courts below that an order for costs to be “subject to detailed assessment if not agreed” results in fixed costs being disapplied; in other words, parties are free to contract out of the fixed recoverable costs scheme.

The general rule is that once a matter has been on the Portal, then fixed recoverable costs apply unless and until it is allocated to the multi-track –

Qader v Esure Services Ltd [2016] EWCA Civ 1109

This was codified by an amendment to the Civil Procedure Rules and CPR 45.29D now reads:

“45.29D. Subject to rules 45.29F, 45.29H and 45.29J, and for as long as the case is not allocated to the multi-track, in a claim started under the EL/PL Protocol  or in a claim to which the Pre-Action Protocol for Resolution of Package Travel Claims applies, the only costs allowed are—

(a) fixed costs in rule 45.29E; and

(b) disbursements in accordance with rule 45.29I.”

Rule 45.29E sets out the fixed costs recoverable in tabular form, determined by the stage at which the claim is settled or disposed of and the amount of the damages agreed or awarded.

Rule 45.29F provides for costs orders in favour of the defendant, rule 45.29H provides for costs of interim applications and rule 45.29I provides that claims for specified disbursements may be allowed.

The rules do not make provision for the parties to contract out of the fixed costs regime, but it is recognised that there is no bar on them doing so: see –

Solomon v Cromwell Group plc [2011] EWCA Civ 1584[2012] 1 WLR 1048  cited in 

Adelekun v Ho [2019] EWCA Civ 1988[2019] Costs LR 1963 .

This was an employment related personal injury claim which settled for £5,000 and the consent order provided that the defendant pay the Claimant’s costs “such costs to be the subject of detailed assessment if not agreed”.

The Claimant lodged a Bill of Costs and the Defendant argued that fixed costs applied.

The Claimant succeeded before the District Judge and the Circuit Judge, and this was a second appeal to the Court of Appeal.

The Court of Appeal here distinguished its own decision, on identical wording, in the case of

Ho v Adelekun [2019] EWCA Civ 1988

where it found that such wording referred to fixed costs in a fixed costs case.

The distinguishing feature here, one might think it a rather weak one, was that Ho involved an acceptance of a Part 36 offer, with its own “highly restrictive” rules.

The Court of Appeal held that there was no ambiguity as to the natural and ordinary meaning of “subject to detailed assessment” in an agreement or order as to costs.

 It plainly denoted that costs were to be assessed by the procedure in CPR 47.

The phrase could not be read as providing for an “assessment” of fixed costs under CPR 45 unless the context led to the conclusion that the wrong terminology had been used so that the phrase should be interpreted otherwise than according to its ordinary meaning.

There was a distinction between assessed costs and fixed costs in the rules and in particular, CPR 44.6 makes clear that summary or detailed assessments do not apply to CPR 45 fixed costs.

Ho was distinguished on the basis that something had gone wrong with the wording used in the offer letter, justifying reading the term “detailed assessment” as applying to fixed costs.

The Part 36 context indicated that it was not intended to disapply the fixed costs regime by reference to an assessment on the conventional basis.

The Court of Appeal analysed the relevant legal principles for interpreting orders, both consent orders and non-consent orders, and quotes at length from the decision of the Supreme Court in

Wood v Capita Insurance Services Ltd [2017] UKSC 24

“10. The court’s task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement. It has long been accepted that this is not a literalist exercise focused solely on a parsing of the wording of the particular clause but that the court must consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to that objective meaning…

11.. Interpretation is…a unitary exercise; where there are rival meanings, the court can give weight to the implications of rival constructions by reaching a view as to which construction is more consistent with business common sense. But, in striking a balance between the indications given by the language and the implications of the competing constructions the court must consider the quality of drafting of the clause…and it must also be alive to the possibility that one side may have agreed to something which with hindsight did not serve his interest… Similarly, the court must not lose sight of the possibility that a provision may be a negotiated compromise or that the negotiators were not able to agree more precise terms.

12. This unitary exercise involves an iterative process by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated…To my mind once one has read the language in dispute and the relevant parts of the contract that provide its context, it does not matter whether the more detailed analysis commences with the factual background and the implications of rival constructions or a close examination of the relevant language in the contract, so long as the court balances the indications given by each.

13. Textualism and contextualism are not conflicting paradigms in a battle for exclusive occupation of the field of contractual interpretation. Rather, the lawyer and the judge, when interpreting any contract, can use them as tools to ascertain the objective meaning of the language which the parties have chosen to express their agreement. The extent to which each tool will assist the court in its task will vary according to the circumstances of the particular agreement or agreements. Some agreements may be successfully interpreted principally by textual analysis, for example because of their sophistication and complexity and because they have been negotiated and prepared with the assistance of skilled professionals. The correct interpretation of other contracts may be achieved by a greater emphasis on the factual matrix, for example because of their informality, brevity or the absence of skilled professional assistance. But negotiators of complex formal contracts may often not achieve a logical and coherent text because of, for example, the conflicting aims of the parties, failures of communication, differing drafting practices, or deadlines which require the parties to compromise in order to reach agreement. There may often therefore be provisions in a detailed professionally drawn contract which lack clarity and the lawyer or judge in interpreting such provisions may be particularly helped by considering the factual matrix and the purpose of similar provisions in contracts of the same type. The iterative process…assists the lawyer or judge to ascertain the objective meaning of disputed provisions.”

In the Ho case, the Court of Appeal had held that the use of the word “assessment” did not take the matter out of the fixed costs regime, as the fixed costs regime “does involve an assessment of some kind (particularly in relation to disbursements and cases where the court is satisfied that exceptional circumstances exists)”.

In that court case the court announced:

“I do not think, therefore, that reference to “detailed assessment” should be taken to imply an intention to displace the fixed costs regime where there are other indications that that was not intended.”

Here the Defendant relied on that decision stating that, as recognised in Ho, it was inherently improbable that the Defendant would have agreed to pay standard basis costs when the fixed costs regime was likely to be much more favourable to it.

“The proper interpretation of the Order

The natural and ordinary meaning of “detailed assessment”

44. In my judgment, and contrary to the appellant’s contention, there is no ambiguity whatsoever as to the natural and ordinary meaning of “subject to detailed assessment” in an agreement or order as to costs. The phrase is a technical term, the meaning and effect of which is expressly and extensively set out in the rules. It plainly denotes that the costs are to be assessed by the procedure in Part 47 on the standard basis (unless the agreement or order goes on to provide for the assessment to be on the indemnity basis). The phrase cannot be read as providing for an “assessment” of fixed costs pursuant to the provisions of Part 45 unless the context leads to the conclusion that the wrong terminology has been used (by the parties or by the Court) so that the phrase should be interpreted otherwise than according to its ordinary meaning.

45. This is abundantly clear from consideration of the rules themselves

i) First and foremost, rule 44.3(4)(a) expressly provides that, where an order for costs, or for assessment of costs, does not indicate the basis of assessment, the costs will be assessed on the standard basis. In other words, the effect of an order which provides for costs “subject to detailed assessment” is, by simple and direct application of the rules, an order that costs will be assessed on the standard basis. An agreement to the same effect, intended to be embodied in an order, must have the same natural and ordinary meaning.

ii) Second, rule 44.6(1), in setting out the court’s power to assess costs (either summarily or by way of a detailed assessment), expressly provides that such power does not relate to fixed costs. Fixed costs under Part 45 are dealt with separately in rule 44.6(2) and are stated to be recoverable “in accordance with that Part”. It could not be clearer that an agreement or order for the detailed assessment of costs does not (unless something has “gone wrong”) relate to fixed costs.

iii) Third, that same clear distinction is apparent from rule 45.29 itself. In circumstances where the court will consider a claim for an amount of costs greater than fixed costs under rule 45.29J, it may do so by assessing the costs (summarily or by way of detailed assessment). Such an assessment must necessarily be on the standard basis unless the court specifically directs that the indemnity basis should be used. Rule 45.29K then draws a distinction between the costs so assessed (“the assessed costs”) and the fixed recoverable costs, requiring the court to award the latter unless the assessed costs are 20% greater. Again, it could not be clearer that costs assessed summarily or under Part 47 are not the same as (and cannot include) fixed recoverable costs.”

“51. In so doing, the solicitors must, applying an objective test, be taken to have been aware of the relevant rules and principles, in particular, (i) that the fixed costs regime can be disapplied by agreement and (ii) that an order providing for detailed assessment (without more) entails an assessment on the standard basis (rule 44.3(4)(a)). In those circumstances it is difficult to see any basis on which the use of the term “detailed assessment” could bear anything other than its natural and ordinary meaning as discussed above. No matter how strictly enforced the fixed costs regime may be in cases to which it properly applies, and no matter how unlikely it was that the respondent would have been able to escape that regime had the matter proceeded, the parties reached a compromise of the dispute on the basis of a provision as to costs which, on its face, would take the case out of the fixed costs regime and entail assessment on the standard basis. There is no objective reason to believe that the solicitors did not intend the term to bear its natural, ordinary (and in my judgment, obvious) meaning, not least because it would be impermissible (and to no avail) to speculate as to the parties’ respective legal or commercial motivations for reaching a settlement on the terms they did. Indeed, the appellant has not suggested that the use of the term “detailed assessment” was a mistake or otherwise did not reflect the parties’ agreement.”

“56. In the present case the agreement reached was not the result of the acceptance of a Part 36 offer: the parties’ intentions are not to be understood in that highly restrictive context and there is no inherent ambiguity in the reference to detailed assessment, internal inconsistency within the terms of the Order or other “indication” that detailed assessment did not bear the meaning ascribed to it under the rules. Although Adelekun appears, on its face, to be a decision on similar facts to the present case, it was in reality a quite different situation, rooted in the parties’ use of the Part 36 offer and acceptance mechanism. No such fetter on the application of the natural and ordinary meaning of the agreed wording as to costs arises in the present case, where the parties reached a free-standing settlement agreement. That agreement included a simple and well-understood provision that the appellant would pay costs subject to detailed assessment, that is to say, on the standard basis.”

It is interesting that the Court of Appeal, in reference to the Ho case, had this to say:

“It is apparent, however, that even in that context Males LJ took considerable persuading before concluding in the end that the intention to depart from the fixed costs regime indicated by the term “detailed assessment” was outweighed by other considerations. He pointed out that, if parties wish to settle on terms that fixed costs will be payable, it is easy enough to say so (see [43]).”

This decision comes as close as it can, without crossing the line, to saying that the decision in Ho was wrong.

Here it was able to distinguish it on, as I have said above, the rather weak ground that that involved Part 36.

It is hard to see why that should allow for a different interpretation of identical wording agreed by experienced solicitors on both sides.

It may well be that the Court of Appeal in a Part 36 case, identical to Ho will now take a different view to the decision in that matter, and follow the judgment here Doyle.

Fixed Costs Agreement Not Displaced By Part 36 Offer

In

Soares v Wilson, Central London County Court, 27 May 2022

a Circuit Judge, sitting with a Costs Judge, allowed the Defendant paying party’s appeal, holding that the parties had agreed that only fixed costs would be payable in a matter which had dropped out of the Portal and been allocated to the multi-track and re-allocated to the fast track.

This was a road traffic accident portal claim which left the Portal as the Defendant denied liability.

Proceedings were issued for in excess of £100,000 and a defence filed and the matter was allocated to the multi-track.

It was subsequently re-allocated to the fast track and then settled for £9,000.

On 8 February 2019, the Defendant’s solicitors made a written offer to settle the claim which was expressed to be “without prejudice save as to costs” and read:

“The Defendant makes an offer to settle the claim on the following terms:

1. The Defendant shall pay the Claimant £9,000 (nine thousand pounds only) in full and final settlement of the claim. The said payment shall be made within 28 days of the approval by the court of the consent order giving effect to this offer.

2. The Defendant will also pay the Claimant’s fixed costs and reasonable disbursements, and in default of agreement the amount therefore shall be determined by the Court. The Defendant will pay the said fixed costs and disbursements within 28 days of the approval by the court of the consent order giving effect to this offer or the determination of the amount thereof by the Court (whichever is the later).”

The Claimant replied as follows on 13 February 2019:

“Please note that your offer in the sum of £9,000, plus fixed costs (pursuant to the Fast Track fixed costs regime) is accepted.

We would be grateful if you would email a notice of Part 36 so this may be accepted, and we can advise the Court of the settlement.

In respect of costs, we would request an interim payment … We would request the sum of £5346.00 being the applicable profit costs (£2655.00 pus £1800.00) plus VAT.”

The Defendant duly made the Part 36 offer by letter dated 21 February 2019 which read:

“We are instructed by our client to put forward a Part 36 offer of £9,000 (Nine Thousand Pounds) in full and final settlement of your client’s claim.

The offer relates to the whole of the claim and is inclusive of interest as set out in Part 36.5(4)

This offer is intended to have the consequences of Part 36. If accepted within 21 days of service of this letter … our client will also pay your client’s fixed recoverable costs in accordance with Part 36.13 to be subject to detailed assessment if not agreed.

If this offer is accepted after that date, your client will be liable for our client’s costs under Part 36.13(5) unless the parties agree or the Court orders otherwise.”

The Claimant replied on the same day:

“We confirm your Part 36 offer in the sum of £9,000 is accepted. We enclose a copy of our letter to the Court confirming the settlement. We await your client’s cheque within the next 14 days.”

The Claimant then served a Bill of Costs not limited to fixed costs, and claiming open, standard costs for the period when the matter was in the multi-track, and fixed costs once the matter had been re-allocated to the fast track.

On an oral review of the decision, the Judge rejected the Defendant’s case that the parties had “made a binding and enforceable agreement in respect of which the Claimant cannot now resile in order to claim costs other than fixed costs”.

The Court here allowed the appeal, holding that the wording and intention was clear and that the reference to assessment did not alter that, as the “courts regularly determine issues on assessment relating to cases in which fixed costs are payable”.

The Court dealt with the Part 36 issues as follows:

“50. Having reached agreement on a compromise, and on the basis of the costs to be paid, the mechanism to give effect to that might have been to lodge a consent order or a draft Tomlin order. But they would have had the disadvantage of delay, a need for a court fee, and the requirement of a decision of a judge or judicial officer. The mechanism offered by Part 36 produced an immediate stay of the claim with no fee and no need for judicial intervention in a context in which the trial date was looming. The fact that the Claimant proffered it and the parties seized it as a pathway to give effect to the compromise they had agreed is readily understandable and to my mind in no way detracts from the fact that compromise on the fixed costs basis had been agreed. I accept the case advanced by the Defendant that the Claimant invited the Defendant to make a Part 36 offer simply so as to finalise the proceedings; the parties had already agreed terms on which the proceedings would conclude.”

The Court went on to say:

“51. Seventh, and as ever, context is all. This is a claim which, being a relatively low value RTA claim (settled at an offered sum of £9000 without any negotiation) was only ever on anything other than its obviously appropriate track (the fast track) because it had been initially quantified at “in excess of £100,000”. That situation had been corrected by an order bringing it back onto its fitting track, the fast track – being one in which costs were fixed. The suggestion that, against that contextual background, the proper construction of the offer was one of “assessed costs from inception to track re-allocation and thereafter fixed costs” is something that I simply cannot accept. To my mind, the observations from Ho at [34] as to the construction of the offer letter in that case (dated 19 April) are equally apposite to the construction of the February 2019 offer letter in this case:

“…the fixed costs regime is designed to ensure that “both sides begin and end the proceedings with the expectation that fixed costs is all that will be recoverable” … That makes it the more unlikely that the letter would reasonably have been understood to be offering something other than fixed costs.”

The Court then concluded on this point:

“56. In Ho one of the questions determined by the Court of Appeal was the significance of the reference to 36.13 in a Part 36 offer and whether this was determinative of the actual costs that would be payable. Newey LJ stated at [29]:

“I do not think the fact that the 19 April letter refers to CPR 36.13 instead of CPR 36.20 is of any great significance.

…What matters more, it seems to me, is that CPR 36.13 itself highlights the fact that CPR 36.20 applies to a claim formerly under the RTA Protocol and, in effect, sends the reader on to that latter rule.

“57. Tenth, I consider it of significance that, despite the meticulous detailed provisions of the CPR, parties to litigation are free to contract-out of their precise effect in any given case. In my judgment there is no bar on contracting out of the fixed costs regime or on contacting into it. If the latter, there is no impediment to the parties agreeing that its operation shall be modified to achieve a particular specified result.”

“58. In short, with great respect to the different reasoning and conclusions of the judge, my reading of the offer and acceptance correspondence is that the parties reached an agreement to conclude an RTA fast track case that was coming up to imminent trial and that agreement was one to offer and accept fixed costs. The judge was wrong to hold to the contrary.”

Comment

A correct decision.

These matters will become of much greater significance in April 2023 when the fixed recoverable costs scheme spreads to virtually all civil litigation claims of £100,000 or less.

Parties need to make it crystal clear what they are agreeing in relation to costs in such matters.

Written by kerryunderwood

August 30, 2022 at 2:52 pm

Posted in Uncategorized

WASTED AND NON-PARTY COSTS UPDATE

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There have been a number of recent High Court decisions concerning the Wasted Costs and Non-Party Costs provisions of section 51 of the Senior Courts Act 1981.

Here I look at four such cases, and at the end of this piece I set out the relevant Statute Law and the relevant Civil Procedure Rules.

LITIGATION FUNDER JOINTLY LIABLE WITH CLIENT FOR COSTS

In

ECU GROUP PLC V HSBC BANK PLC AND OTHERS [2022] EWHC 1616 (Comm)

the High Court held one of the claimant’s funders, Therium, jointly and severally liable with the claimant for an indemnity costs order made against the claimant, a specialist currency debt management firm which lost a claim against HSBC when a claim was struck out as being out of time.

The order ran from 30 November 2018, from when Therium agreed to fund the proceedings retrospectively, although the Litigation Funding Agreement was not signed until 19 September 2019.

The case is also notable in that it appears to be the first one where such an order has been made against a single funder, irrespective of the involvement of other funders.

Since the claimant had first sought legal advice in 2016, at least 27 parties had provided funding for the proceedings, with all of them except Therium being shareholders and/or bondholders in the claimant company.

Therium accepted that it had a liability for costs, and that that liability was on the indemnity basis as that was the order made against the claimant, but argued that it should only be liable for a proportion, and not all, of the costs as there were other funders.

The court held that Therium should bear joint responsibility with ECU for the costs of the proceedings irrespective of the other funders or investors, stating that:

“Therium had far and away the dominant financial interest in the outcome of the proceedings and effectively controlled the proceedings through the LFA .“  – [Litigation Funding Agreement].

The defendant had no choice but to incur costs in defending the claim and it would not be fair to make recovery of those costs dependent on the pursuit of numerous individuals and entities.

While Therium might, in due course, seek to join the claimant’s other funders, it was not just to delay making an order against Therium in order to give it time to do so.

The Court back-dated the liability to 30 November 2018 as Therium had retrospectively agreed to fund the matter from that date.

The Court said:

“In my view, although Therium did not “cause” those past costs to be incurred, by agreeing to fund the litigation it was not just the “inheritor” of those costs but took a positive decision that as part of the funding arrangements it would fund those incurred costs.”

However, Therium should not have any liability for the period before 30 November 2018 which was not covered by the Litigation Funding Agreement.

Therium had provided £9.3million under the Litigation Funding Agreement to fund the proceedings, and had they been successful would have recovered a contingency fee of three times that amount plus 20% of any recovery, net of costs, above £100 million, as well as reimbursement of the costs paid out.

Having taken the potential upside of the contingency fee calculated by reference to all of the funding costs, it will be unfair for Therium to avoid the corresponding downside of liability for those incurred costs.

WASTED COSTS AGAINST SOLICITORS WHO HAD NO AUTHORITY TO ACT

In

Rushbrooke UK Ltd v 4 Designs Concept Ltd [2022] EWHC 1687 (Ch)

the Chancery Division of the High Court made a wasted costs order against a firm of Solicitors which had acted for a limited company without checking whether the person instructing them had authority to do so.

The Solicitors acted for a company which made an unsuccessful application to restrain a winding-up petition, the application being struck out on the basis that the director who authorized it had no authority to do so on his own.

He was one of two directors.

The Court ordered the company to pay the other side’s costs but declined to make the individual director jointly and severally liable.

The other side made an application for wasted costs or against the Solicitors who had acted for the company without authority.

“14. In my judgment, there is prima facie evidence of a “significant breach of a substantial duty imposed by a relevant code of professional conduct” by the solicitors in this case. There is also prima facie evidence of unreasonable conduct. In my judgment, it is prima facie unreasonable for solicitors instructed by one director, at a time when the only two directors have fallen out and cannot agree on anything, to take instructions on behalf of the company to engage the company in legal proceedings without first satisfying themselves of the director’s authority to do so. I also consider that this is prima facie evidence of negligence by the solicitors. A reasonably competent solicitor would regard it as fundamental to be clear at the outset on the authority of the person representing the client to instruct the solicitor.”

“19. If Mr McAndrew is seeking to suggest that the wasted costs jurisdiction requires conduct which is vexatious or designed to harass opponents, then I respectfully disagree. It requires conduct which is improper, unreasonable or negligent. Good faith on its own is not a defence. In my judgment Mr McAndrew provides no evidence to rebut my initial view that there was a significant breach of a substantial duty imposed by a relevant code of professional conduct (at least to be clear about the source of his instructions to act), and therefore his behaviour was improper, and also that it was unreasonable of him in the circumstances to assume that Mr Steventon-Smith had authority on his own on behalf of the company. On the face of it, it seems negligent as well, but I need not decide that.”

“22. The third requirement for a wasted costs order is that it is just in all the circumstances to order the legal representative to compensate that party for the whole or part of those costs. On the face of it, in circumstances where the company is or is likely to be insolvent, so that the respondent will not be able to recover its costs (in whole or in part) from the company, it seems to me obviously just that the solicitors who allowed these proceedings to go ahead by failing to satisfy themselves of the director’s authority to give instructions should compensate the respondent for the expenditure of the unnecessary costs. It is the more so in circumstances where the respondent in pre-application correspondence expressly raised the issue of the authority of Mr Steventon-Smith to instruct solicitors on behalf of the company, but this was simply brushed aside. As before, there is nothing in the witness statement of Mr McAndrew to rebut this view. I quite accept the good faith of NRG. But that does not prevent a wasted costs order from being made, or prevent its being just to make one.”

The High Court also said that there is another jurisdiction available allowing the Court summarily to order Solicitors to compensate parties who have suffered loss because of the breach of the implied warranty that they had their client’s authority to bring the proceedings.

In

Zoya Ltd v Ahmed [2016] 4 WLR 174, [29]

the Court said that:

in all cases, the liability was strict and that it was not necessary to prove that the agent knew or should have known of the want of authority.

The High Court said that given its conclusion on wasted costs order it did not need to decide this point, but had it so needed it would have made an order under the Court’s breach of warranty jurisdiction.

Comment

This is often a difficult area, that is who, from a limited company, has authority to instruct a Solicitor, and how is that authority evidenced.

As this case makes clear, it is essential that Solicitors satisfy themselves that they do have such authority, both as a matter of professional conduct under the Solicitors’ Code of Conduct and the breach of the implied warranty jurisdiction, as well as the wasted costs jurisdiction.

Wasted costs orders are not easy to obtain, but as shown here, the Court has an easier and less demanding  way of supplying a remedy, and that is by finding a breach of the implied warranty that a Solicitor has authority to act for the client.

WASTED COSTS JURISDICTION INAPPROPRIATE TO GET ROUND COSTS RESTRICTIONS

In

Kerseviciene v Quadri & Anor (Costs) [2022] EWHC 1757 (QB) (07 July 2022)

the High Court refused the respondent’s costs in relation to attending a permission to appeal hearing.

Here the appellant had been granted permission to appeal on two out of three grounds in relation to the admissibility of a Witness Statement and made an oral application for permission to appeal on the third ground.

That application was refused, and the respondent, who had attended the permission hearing with leading counsel, sought the costs of the application from the appellant’s solicitors under the wasted costs jurisdiction under section 51 of the Senior Courts Act 1981.

The costs were £67,095.78, most of this being the costs of leading counsel at £47,500 plus VAT.

As well as refusing the application on the ground that it had not been necessary for the respondent to attend, the court also said that the wasted costs jurisdiction should not be used to sidestep the usual restrictions on respondents recovering costs of attending permission to appeal hearings.

The respondent’s attendance had been unnecessary. If it felt it necessary to correct the position which they say had been wrongly created by the appellants, it should have been done by way of a short letter, and not by attending the hearing:

“The cost of preparing a letter would have been trivial by comparison.”

The usual position is that respondents to prospective appeals will not receive the costs of attending a permission to appeal hearing – see CPR 52B.8.1 and Practice Direction 52C.20 set out below.

Even without such a letter and any attendance by the respondent, the court was able to identify the appropriate order.

From the pre-hearing reading and oral submissions by the appellant’s counsel, it was apparent that the additional ground had not been relied upon below, that it was not appropriate to allow it now to be run, and that it had no real prospect of success.

Even had permission to appeal been granted, the consequences would not be severe on the respondent as it could have advanced the same arguments at the appeal hearing, as permission had been granted on two grounds already, and that approach would have been far more proportionate than incurring over £67,000 costs on the oral renewal application.

The High Court said that the wasted costs jurisdiction should not invoked to get round the usual position that respondents to prospective appeals will not receive the costs of attending a permission to appeal hearing.

In any event the shortcomings in the appellant’s application were unlikely to amount to unreasonable or improper conduct such as would have given rise to a Wasted Costs Order.

Furthermore, any Wasted Costs Order should generally only be sought after trial.

CPR Practice Direction 52B:

8.1 Attendance at permission hearings: Where a respondent to an appeal or cross-appeal attends the hearing of an application for permission to appeal, costs will not be awarded to the respondent unless–

(a) the court has ordered or requested attendance by the respondent;

(b) the court has ordered that the application for permission to appeal be listed at the same time as the determination of other applications;

(c) the court has ordered that the hearing of the appeal will follow the hearing of the application if permission is granted; or

(d) the court considers it just, in all the circumstances, to award costs to the respondent.”

CPR Practice Direction 52C.20:

Respondent’s costs of permission applications

20.

(1) There will normally be no order for the recovery of the costs of a respondent’s written statement. In most cases an application for permission to appeal will be determined without the need for the respondent to attend a hearing. In such circumstances an order for costs will not normally be made in favour of a respondent who voluntarily attends a hearing.

(2) If the court directs the respondent to file submissions or attend a hearing, it will normally award costs to the respondent if permission is refused.”

HIGH COURT SETS ASIDE NON-PARTY COSTS ORDER MADE AGAINST LOCAL AUTHORITY IN PRIVATE LAW PROCEEDINGS

In

Peterborough City Council v K and others [2022] EWFC 61

the Family Court set aside a non-party costs order made against a local authority in private law children proceedings, stating that such an order could not be used as a device for funding costs in private law family proceedings.

Private law proceedings had been issued in relation to four children and was heard before a Circuit Judge who was critical of the local authority’s failure to issue private law proceeding itself and made an order against the local authority for non-party costs, covering all past and future litigation costs that the applicants may incur.

The case involved four children who left their mother’s care and went to live with their adult sister and her partner, who applied for a child arrangements order.

The local authority had been involved with the children, who were the subject of child protection plans, and following two directions for reports under section 37 of the Children Act 1989, the local authority decided not to issue care proceedings and the applicants were not eligible for legal aid.

The High Court held that although the local authority conduct could be criticized it was not unreasonable or reprehensible and there were no exceptional circumstances justifying a non-party costs order.

The Family Court cannot direct a local authority to issue care proceedings and costs orders cannot be made to provide funding to parties because they are not eligible to receive legal aid.

The High Court said that it was apparent from the judgment as a whole that the costs orders had been designed to provide the parties with funding for legal advice and representation to which they had no entitlement under the laws enacted by Parliament.

The court pointed out that it was a striking feature of the order that it not only ordered the non-party to pay past costs of the proceedings, but also all the future costs.

The High Court set aside the order and also gave extensive guidance from the authorities in relation to the principles to be applied in non-party costs orders in private family proceedings concerning the welfare of children.

“46. Having regard to the authorities it seems to me that the following guidance applies to non-party costs orders in private family proceedings concerning the welfare of children:

i) The Court has a wide discretion to make costs order including against non-parties but an application for a costs order against a non-party should be treated with caution and such an order will be exceptional by comparison with the ordinary run of cases.

ii) A non-party costs order should only be made if it is just to do so in all the circumstances.

iii) In considering whether a non-party costs order is just, the court should keep in mind that in the ordinary run of family cases concerning the welfare of children, inter-party costs orders are not made.

iv) The circumstances justifying a non-party costs order are not closed but where the conduct of a non-party is relied upon as the basis for making such an order, the non-party must have been guilty of reprehensible behaviour or unreasonable conduct in the proceedings.

v) In considering whether the behaviour of a non-party Local Authority was reprehensible, or its conduct within the proceedings was unreasonable, regard must be had both to the powers entrusted to and the obligations of Local Authorities and the finely balanced judgments that Local Authorities may have to make in exercising those powers and fulfilling those obligations.

vi) The non-party should have a close connection with the proceedings such that it is fair that they are bound by the findings made in the substantive proceedings.

vii) The circumstances which should be taken into account include the financial consequences to the potential costs recipients of the acts or omissions of the non-party. If the potential costs recipients would have incurred the same financial liabilities in any event then it would be unjust to make a non-party costs order. Hence, ordinarily, the court should have regard to the amount of costs sought to be recovered from the non-party and consider whether there is a causal connection between those costs and the non-party’s acts or omissions.

viii) A non-party may well suffer injustice if not warned that an application or costs may be made against them.

ix) A non-party should be joined as a party for the purposes of the costs application only and be given a reasonable opportunity to attend a hearing at which the court will consider the matter further – CPR r.46.2(1).

x) The judge who has determined issues in the case (at a finding of fact hearing or a final hearing) should be the judge who determines an application for a non-party costs order.

xi) The procedure for determining the application should be summary in nature in that the judge should base their decision on the evidence given and findings made in the substantive proceedings.

xii) A non-party costs order should not be used as a device to circumvent other rules or provisions concerning the funding of advice or representation.”

The High Court said that this guidance provides consistency in approach in relation to inter-party costs, wasted costs against legal representatives, and non-party costs orders in private proceedings concerning the welfare of children.

The same guidance might also apply to public law proceedings, but here the court was only dealing with private law proceedings.

Wasted Costs Orders-  Statute Law

Originally, there was an inherent jurisdiction in the court to require a solicitor for one party to pay to another party costs which had been wasted by the solicitor’s undue delay or misconduct: see Myers v Ellman [1940] AC 282, HL.

This jurisdiction was given statutory recognition by the Solicitors Act 1957, section 50(2).

It was however regulated by the procedural rules only in 1960.

The relevant rule later became RSC 1965 Ord 62, rule 8(1), and then in 1986 RSC Ord 62, rule 11.

Now wasted costs orders are governed by section 51(6) and (7) of the Senior Courts Act 1981.

“(6) In any proceedings mentioned in susbsection (1), the court may disallow, or (as the case may be) order the legal or other representative concerned to meet, the whole of any wasted costs or such part of them as may be determined in accordance with rules of court.”

“(7) In subsection (6), “wasted costs” means any costs incurred by a party—

(a) as a result of any improper, unreasonable or negligent act or omission on the part of any legal or other representative or any employee of such a representative; or

(b) which, in the light of any such act or omission occurring after they were incurred, the court considers it is unreasonable to expect that party to pay.”

Civil Procedure Rules

The relevant Civil Procedure Rules in relation to wasted costs are CPR 46.8 and CPR Practice Direction 46, paragraph 5.

46.8

(1) This rule applies where the court is considering whether to make an order under section 51(6) of the Senior Courts Act 1981 (court’s power to disallow or (as the case may be) order a legal representative to meet, ‘wasted costs’).

(2) The court will give the legal representative a reasonable opportunity to make written submissions or, if the legal representative prefers, to attend a hearing before it makes such an order.

(3) When the court makes a wasted costs order, it will –

(a) specify the amount to be disallowed or paid; or

(b) direct a costs judge or a district judge to decide the amount of costs to be disallowed or paid.

(4) The court may direct that notice must be given to the legal representative’s client, in such manner as the court may direct –

(a) of any proceedings under this rule; or

(b) of any order made under it against his legal representative.

46

5.1  A wasted costs order is an order –

(a) that the legal representative pay a sum (either specified or to be assessed) in respect of costs to a party; or

(b) for costs relating to a specified sum or items of work to be disallowed.

5.2  Rule 46.8 deals with wasted costs orders against legal representatives. Such orders can be made at any stage in the proceedings up to and including the detailed assessment proceedings. In general, applications for wasted costs are best left until after the end of the trial.

5.3  The court may make a wasted costs order against a legal representative on its own initiative.

5.4  A party may apply for a wasted costs order –

(a) by filing an application notice in accordance with Part 23; or

(b) by making an application orally in the course of any hearing.

5.5  It is appropriate for the court to make a wasted costs order against a legal representative, only if –

(a) the legal representative has acted improperly, unreasonably or negligently;

(b) the legal representative’s conduct has caused a party to incur unnecessary costs, or has meant that costs incurred by a party prior to the improper, unreasonable or negligent act or omission have been wasted;

(c) it is just in all the circumstances to order the legal representative to compensate that party for the whole or part of those costs.

5.6  The court will give directions about the procedure to be followed in each case in order to ensure that the issues are dealt with in a way which is fair and as simple and summary as the circumstances permit.

5.7  As a general rule the court will consider whether to make a wasted costs order in two stages –

(a) at the first stage the court must be satisfied –

(i) that it has before it evidence or other material which, if unanswered, would be likely to lead to a wasted costs order being made; and

(ii) the wasted costs proceedings are justified notwithstanding the likely costs involved;

(b) at the second stage, the court will consider, after giving the legal representative an opportunity to make representations in writing or at a hearing, whether it is appropriate to make a wasted costs order in accordance with paragraph 5.5 above.

5.8  The court may proceed to the second stage described in paragraph 5.7 without first adjourning the hearing if it is satisfied that the legal representative has already had a reasonable opportunity to make representations.

5.9  On an application for a wasted costs order under Part 23 the application notice and any evidence in support must identify –

(a) what the legal representative is alleged to have done or failed to do; and

(b) the costs that the legal representative may be ordered to pay or which are sought against the legal representative.

Non-Party Costs Orders

The relevant statutory provision is section 51(1)-(5) of the Senior Courts Act 1981 and in the Civil Procedure Rules the relevant rule is CPR 46.2.

51(1) Subject to the provisions of this or any other enactment and to rules of court, the costs of and incidental to all proceedings in—

(a) the civil division of the Court of Appeal;

(b) the High Court; and

(c) county court,

shall be in the discretion of the court.

51(2) Without prejudice to any general power to make rules of court, such rules may make provision for regulating matters relating to the costs of those proceedings including, in particular, prescribing scales of costs to be paid to legal or other representatives or for securing that the amount awarded to a party in respect of the costs to be paid by him to such representatives is not limited to what would have been payable by him to them if he had not been awarded costs.

51(3) The court shall have full power to determine by whom and to what extent the costs are to be paid.

51(4) In subsections (1) and (2) “proceedings” includes the administration of estates and trusts.

51(5) Nothing in subsection (1) shall alter the practice in any criminal cause, or in bankruptcy.

Civil Procedure Rule 46.2

46.2

(1) Where the court is considering whether to exercise its power under section 51 of the Senior Courts Act 1981 (costs are in the discretion of the court) to make a costs order in favour of or against a person who is not a party to proceedings, that person must –

(a) be added as a party to the proceedings for the purposes of costs only; and

(b) be given a reasonable opportunity to attend a hearing at which the court will consider the matter further.

(2) This rule does not apply –

(a) where the court is considering whether to –

(i) make an order against the Lord Chancellor in proceedings in which the Lord Chancellor has provided legal aid to a party to the proceedings;

(ii) make a wasted costs order (as defined in rule 46.8); and

(b) in proceedings to which rule 46.1 applies (pre-commencement disclosure and orders for disclosure against a person who is not a party).

Practice Direction

The Practice Direction does not deal with non-party cost orders.

Written by kerryunderwood

August 26, 2022 at 12:41 pm

Posted in Uncategorized

INDEMNITY COSTS IN FIXED COSTS CASES FROM APRIL 2023

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April 2023, when fixed recoverable costs will apply to virtually all civil litigation claims valued at £100,000 or less, will be on us before we know it.

Below I set out the current state of play in relation to personal injury matters and indemnity costs and fixed costs, and, at present, fixed recoverable costs only apply in personal injury cases, but that all changes in nine months’ time.

But the new system, from April 2023, in relation to Part 36 is that instead of a claimant getting indemnity costs for matching or beating its own Part 36 offer, it will get a 35% uplift on fixed recoverable costs.

The rules have not yet been published, but it seems obvious that rather than fixed costs plus indemnity costs, which is the current rule, the successful claimant will simply get a 35% uplift on the fixed costs sum from the expiry of the date of accepting the Part 36 offer, generally 21 days after it has been made.

That still leaves the issue of when the enhancement runs from, that is whether it is the end of that stage, or the stage within which the offer expires.

Let us take a specific example to make that clear.

In a Band 4 case worth £100,000 and settled before issue, the fixed recoverable costs will be £16,000.

The claimant makes a Part 36 Offer, which is not accepted, and ultimately the matter goes to trial, and the claimant matches or beats that offer.

Clearly the claimant gets the 35% enhancement from the beginning of Stage 2, assuming the time for accepting the offer had expired in Stage 1.

The issue is whether the claimant also gets the 35% uplift, that is £5,600 plus VAT, in relation to the Stage 1 fixed costs.

That may not seem a great deal of money in the context of a claim that has gone to trial, but there have been arguments about much lower sums in the current fixed costs scheme.

The same point applies to unreasonable conduct, which will attract a 50% uplift on fixed costs in the new regime.

The issue is whether, if the court finds misconduct, the uplift applies to the whole of the fixed costs, or whether the court has to determine the point at which the misconduct began.

If, for example, the misconduct started pre-action, then it seems that all of the fixed recoverable costs will attract the 50% uplift.

Where the position is unclear is where there is misconduct over a particular aspect of the claim, for example, in relation to the preparation for trial.

The issue will be whether it is simply that stage which attracts the 50% uplift, or the whole of the fixed recoverable costs.

It seems likely that a court must look at all of the circumstances, as it does now, to decide whether there has been misconduct overall justifying the 50% uplift, rather than looking at a 50% uplift for certain stages, and not others.

There is also the question of the interplay between the Part 36 uplift and the misconduct uplift, in circumstances where the claimant matches or beats its own Part 36 offer, and the defendant is guilty of misconduct.

The order of application does not matter as it produces the same result, as shown by taking an example where the misconduct started pre-issue, and assuming that the court orders the 50% uplift for the whole of the case, and assuming that the claimant matched or beat its Part 36 offer, where the time for acceptance of that offer expired pre-issue, and that the new rule will mean that the uplift is available for the stage in which the offer expired, and does not commence to the next stage.

Let us assume that the fixed costs are £50,000.

The maths is as follows:

Alternative basis:

Thus, the order of the application of the Part 36 uplift and the misconduct uplift is neutral.

However, what has not been decided, is whether that is the correct method at all, or whether one simply applies each uplift separately to the original fixed costs, which is logical, and that gives the following equation:

These are far from straightforward matters, and it is to be hoped that explicit guidance is given on these points, with worked examples as above, being given in the Civil Procedure Rules themselves.

I have stated what I think to be the logical approach, which is the last one.

However, as will be seen from the piece below, the Court of Appeal took what might seem an illogical view in awarding fixed costs and indemnity costs for the whole post-expiry period, rather than simply ruling that indemnity costs replace the fixed costs.

There is logic in the Court of Appeal decision both in terms of its encouraging early settlement, but also given the fact that indemnity costs, calculated on the old fashioned hourly rate, can actually be less than fixed recoverable costs.

I will look at this elsewhere in the context of the exceptional circumstances escape from fixed costs under CPR 45.29J.

Below is the law in relation to the current personal injury fixed costs scheme.

Personal Injury Fixed Costs Scheme

In Broadhurst v Tan the Court of Appeal held that a claimant who matches or beats its own Part 36 offer in a fixed costs case gets indemnity costs, as well as the other enhancements such as a 10% increase in damages and additional interest etc. arguably in addition to fixed costs.

As far as fixed costs are concerned this resolved the issue between the two different lines of authority, both entirely justifiable on the wording of the different rules, one saying that fixed costs were just that and that an indemnity costs order made no difference, and one holding that Part 36 and its provision for indemnity costs trumped CPR 45.29B, which deals with fixed costs.

One of those lines of authority was the Smith v Taylor line where the court found that Part 36 took priority and not CPR 45.29B and here the Court of Appeal dismissed the appeal against that decision.


The other line of cases was generally known as Dixon v Bennett but in fact the appeal here was in a case called Broadhurst v Tan where the lower court had come to the same conclusion as in Dixon v Bennett, that is that nothing above fixed costs could be awarded following a successful claimant Part 36 offer.

The Court of Appeal allowed the appeal in that case.

The Master of the Rolls made it clear that although these cases concerned the version of Part 36 which applied before 6 April 2015 “the provisions applicable to this appeal remains substantially the same” and therefore this is the law in relation to post 6 April 2015 Part 36 offers. 

It was accepted that there was a tension between CPR 45.29B and CPR 36.14A. The former states that the only costs to be awarded in a Section III A cases are fixed costs, whereas the latter says that, in such cases, rule 36.14 will apply subject only to the modifications stated in rule 36.14A, and following, and none of those modifications affects rule 36.14(3).

The Explanatory Memorandum to the 2013 Amendment Rules which was laid before Parliament to accompany the draft statutory instrument is admissible as an aid to the construction of the rules. See

R v Secretary of State for the Environment ex parte Spath Homes Ltd [2001] 2 AC 349.

At paragraph 7.1(e) that Explanatory Memorandum states:-

“New rules 36.10A and 36.14A make provision in respect of the fixed costs a claimant may recover where the claimant either accepts or fails to beat a defendant’s offer to settle made under part 36 of the CPR. Provision is also made with regard to defendants’ costs in those circumstances. If a defendant refuses a claimant’s offer to settle and the court subsequently awards the claimant damages which are greater than or equal to the sum they were prepared to accept in the settlement, the claimant will not be limited to receiving his fixed costs, but will be entitled to costs assessed on the indemnity basis in accordance with rule 36.14.”

The counterview, rejected by the Court of Appeal, was that although rule 36.14(3) applies in a fixed costs case, there is no difference between profit costs assessed on the indemnity basis and the fixed costs provided in Table 6B of rule 45.29C.

It was common ground that under CPR 45.29J the court had a general discretion to allow additional costs in exceptional circumstances – the so-called escape clause.

It was also common ground that the matching or beating of a claimant’s Part 36 offer would not of itself bring the matter within the escape clause.

As to the practical application of this rule the Court of Appeal, at paragraph 31, said:- 

“Where a claimant makes a successful Part 36 offer in a section IIIA case, he will be awarded fixed costs to the last staging point provided by rule 45.29C and Table 6B. He will then be awarded costs to be assessed on the indemnity basis in addition from the date that the offer became effective. This does not require any apportionment. It will, however, lead to a generous outcome for the claimant. I do not regard this outcome as so surprising or so unfair to the defendant that it requires the court to equate fixed costs with costs assessed on the indemnity basis… a generous outcome in such circumstances is consistent with rule 36.14(3) as a whole and its policy of providing claimants with generous incentives to make offers, and defendants with countervailing incentives to accept them.”

Thus, one looks at the date of settlement or judgment and the claimant gets fixed costs to that stage in the usual way, whether or not a Part 36 offer has been made. That is straightforward.

In addition, the claimant gets costs on the indemnity basis from the date that the offer became effective. I take that phrase to mean from 21 days after the offer was made.

Let us say that the claimant makes a Part 36 offer when the matter is out of the portal but before proceedings are issued. The claimant subsequently matches or beats that offer at trial.


The claimant will get full fixed costs, including the advocacy fee and in addition will get full indemnity costs from 21 days after the successful Part 36 offer was made. For all intents and purposes, the claimant, or rather the claimant’s solicitor, will be paid twice – once at the level of fixed costs and once at the full indemnity rate.

As I understand the judgment no credit for the fixed costs has to be given against the indemnity costs.

As the court said, “this does not require any apportionment.” Also, there would be no need for the reference to this being a generous outcome for the claimant; if the claimant just received indemnity costs and not fixed costs as well, then it would be just the same as any non-fixed costs case and so there would be no additional element of generosity.

This is a view shared by Professor Dominic Regan and I am grateful to Dominic for considering this piece.

An alternative interpretation is that the claimant gets fixed costs to the point where the Part 36 offer was made and indemnity costs thereafter, but again that would not involve any element of that being a generous outcome for the claimant. It would also make less difference than normal as in fixed costs cases part of the recoverable fee is essentially a recoverable contingency fee related to the amount of damages, whatever stage the case has reached. I suppose that that could be interpreted as the element of generosity.

Written by kerryunderwood

August 25, 2022 at 10:00 am

Posted in Uncategorized

SCHEDULES OF COSTS FOR SUMMARY ASSESSMENTS AND LATE OR NO SERVICE

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Any court must now always consider making a summary assessment of costs, unless it is making an order for fixed costs.

That is the effect of Practice Direction 44, paragraph 9.1 which reads:

“When the court should consider whether to make a summary assessment

9.1

Whenever a court makes an order about costs which does not provide only for fixed costs to be paid the court should consider whether to make a summary assessment of costs.”

CPR 44.1 defines “Summary Assessment” as meaning the procedure whereby costs are assessed by the Judge who has heard the case or application.

The summary assessment does not have to take place on the day.

Paragraph 9.7 of the Practice Direction reads:

“No summary assessment by a costs officer

9.7

The court awarding costs cannot make an order for a summary assessment of costs by a costs officer. If a summary assessment of costs is appropriate but the court awarding costs is unable to do so on the day, the court may give directions as to a further hearing before the same judge.”

CPR 44.3(1) states that the basis of those costs is unaffected by whether they are subject to summary assessment or detailed assessment.

Practice Direction 44, paragraph 9.2 provides:

“Timing of summary assessment

9.2

The general rule is that the court should make 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,

unless there is good reason not to do so, for example where the paying party shows substantial grounds for disputing the sum claimed for costs that cannot be dealt with summarily.”

Paragraph 9.5(1) states that:

“Duty of parties and legal representatives

9.5(1)

It is the duty of the parties and their legal representatives to assist the judge in making a summary assessment of costs in any case to which paragraph 9.2 above applies, in accordance with the following subparagraphs.”

9.5(2) sets out what the schedule must contain and 9.5(3) states that the statement of costs should follow as closely as possible Form N260 and must be signed by the party or the party’s legal representative.

9.5(4) reads:

“9.5(4)

The statement of costs must be filed at court and copies of it must be served on any party against whom an order for payment of those costs is intended to be sought as soon as possible and in any event –

(a) for a fast track trial, not less than 2 days before the trial; and

(b) for all other hearings, not less than 24 hours before the time fixed for the hearing.” 

The opening paragraph of Practice Direction 9.5 makes it clear that the purpose of filing form N260 at court is to assist the Judge in making a summary assessment of costs in any case to which paragraph 9.2 applies, and 9.2(a) covers all fast track claims.

The penalty provision is in paragraph 9.6 of Practice Direction 44 and reads:

“9.6

The failure by a party, without reasonable excuse, to comply with paragraph 9.5 will be taken into account by the court in deciding what order to make about the costs of the claim, hearing or application, and about the costs of any further hearing or detailed assessment hearing that may be necessary as a result of that failure.”

The leading case on the serving of Costs Schedules where summary assessment of costs is sought is:

Macdonald v Taree Holdings Ltd [2001] 1 Costs LR 147

In that case a Deputy District Judge refused Mr Macdonald his costs of a successful application to set aside a statutory demand as he had not filed and served the Schedule of Costs, and was thus in breach of the Practice Direction.

Mr Macdonald appealed, and the High Court held that the correct approach in such circumstances is for the court to take the failure into account, but to ensure that its reaction is proportionate.

A court should consider whether there was a mere failure to comply, or whether there were additional aggravating factors, for example a history in the litigation of failure to file and serve on time.

Where there is a mere failure to file and serve on time, it would not be right to deprive a party of their costs altogether.

In the Macdonald case, on the facts, the High Court found that there had been a mere failure to comply, with no aggravating factors, and therefore that the Deputy District Judge was wrong to refuse Mr Macdonald all of his costs.

Other cases, following this decision, have taken the same approach, namely that the failure to serve Costs Schedules on time should not lead to the party losing all of its costs.

The issue of failure to provide Costs Schedules, and the costs consequences, recently came up in a whole series of cases brought by North Warwickshire Borough Council, being committal applications arising from breaches of an injunction in relation to a protest at an oil terminal.

In

North Warwickshire Borough Council v Milner-Edwards [2022] EWHC 1458 (QB)

the High Court declined to make an order as to costs as the claimant had failed to file or serve a Schedule of Costs.

The court commented that neither the court nor the defendant had had the opportunity of understanding what costs were being sought, and that a Schedule should have been provided if costs were going to be pursued.

The judgment in relation to costs took up just one paragraph:

“25.    I am not going to make any order as to costs because the claimant has failed to file or serve a schedule of costs. Neither the court nor the defendant has thus had the opportunity of understanding what costs are sought. A schedule should have been provided if costs were going to be pursued.”

In

North Warwickshire Borough Council v Webb [2022] EWHC 1516 (QB)

the High Court came to exactly the same conclusion, for the same reasons, and again dealt with the issue of costs in one paragraph:

“21. I am not going to make any order that you pay the costs of the proceedings. The claimant has failed to provide a schedule of costs, as they should have done, to either the court and or to the defendants. You are disadvantaged in to responding to an application for costs. I therefore make no order as to costs, a position which mirrors that I have adopted with other defendants in a similar position.”

In

North Warwickshire Borough Council v Coleman & Anor [2022] EWHC 1459 (QB)

the facts were slightly different, but again the High Court dealt with the issue of costs in one paragraph, and again refused to make an order for costs, the reason being that the claimant had this time served a Costs Schedule, but it was irrelevant to this particular case.

“19. The claimant has made an application for costs. Unlike similar cases that have proceeded before the court over the past two days, the claimant has now prepared a costs schedule. However, the costs schedule relates to the hearings on 4 and 5 May 2022. On 4 May neither Mr Colemann or Mr Johnson’s cases were listed. They were not part of the protest group arrested and produced on 5 May. The costs schedule is thus irrelevant to either defendant. In the absence of the claimant serving a relevant costs schedule, I am not prepared to make a costs order. There will therefore be no order as to costs as between the claimant and Mr Coleman and Mr Johnson.”

In

North Warwickshire Borough Council v (1) Lucia Whittaker De Abreu (2) Alyson Lee [2022] EWHC 1460 (QB)

the claimant finally managed to serve a correct Costs Schedule and was rewarded with some costs, and again the High Court dealt with the matter in one paragraph.

“19. The claimant has made an application that you pay a contribution towards its costs in the sum of £195 each. The claimant has produced a costs schedule setting out their costs of the hearings that were listed on 4 May and 5 May. You were supposed to attend court on 4 May but failed to do so. On 5 May you were produced from custody following your arrest. Counsel on behalf of Ms Whittaker De Abreu opposes the making of a costs order on the basis that other defendants that appeared before the court over the past two days have had not been ordered to pay costs. Over the last two days the claimant has failed to file or serve a schedule of costs and therefore the court and the defendants had no information before them as to how those costs were being quantified. The position today is different. The claimant has now provided a schedule of costs. The defendants have had the opportunity to consider that. It is a schedule which is generous to the defendant as it does not include any costs from the hearing on 28 April or in relation to today. I am going to make an order that the defendants make a contribution to the claimant’s costs. Whilst that will mean that there is not parity between all the defendants facing contempt of court matters, that is the good fortune of the defendants who appeared earlier this week and not a reason why the claimant should be deprived of its costs now that it have got their house in order. The general rule is that costs follow the event, and there is no reason to depart from that rule. As to the quantum of those costs, the sum of £195 is sought from each defendant. That is a perfectly proportionate sum and I order each defendant to pay the claimant the sum of £195. Having considered the financial circumstances of each defendant, Ms Whittaker De Abreu has modest savings and Ms Lee’s financial position generally is such that the sums are to be paid in full to the claimant by 1 June 2022.”

It should be noted that the costs in each of these cases were low, generally £195 per defendant, and therefore the consequences of disallowing those costs altogether was relatively insignificant in monetary terms, and of course the claimant in each case is a public body.

Nevertheless, these are a number of High Court decisions where failure to file and serve a Costs Schedule led to no costs being awarded.

In

Gee, Re The Estate of [2022] EWHC 1590 (Ch)

the Chancery Division of the High Court was considering an argument about whether the costs incurred by the claimant in an attempt to prevent a breach of a court order were recoverable, and entirely unsurprisingly, the Court held that they were as they were incidental to the application.

The successful claimant sought its costs of that application, but had not filed form N260,

“18. Lastly, I turn to the question of detailed assessment and payment on account. The applicants did not provide a schedule of costs, and therefore it is not possible for me to conduct a summary assessment of those costs. The respondents observe that this was an application which lasted less than one day. Therefore, the general rule is that the court should assess the costs summarily: CPR rule 44.6, PD 44 para 9.2. However, because there is no costs schedule, I cannot properly go down that route. I must therefore order a detailed assessment, unless the parties are able to agree the amount of the costs (which, in the circumstances, I consider very unlikely).”

As we have seen, it is not correct that the inability to deal with the matter on the day means that summary assessment cannot be ordered, and the judge could have adjourned the matter for serviceof the costs schedule and consequent summary assessment, and reserved the matter to himself.

The significance of this decision, in the context of this piece, is that the Court did not impose any penalty under paragraph 9.6 of Practice Direction 44.

At Paragraph 21 the High Court considered the percentage of claimed costs to award by way of an interim payment and, in spite of the absence of a schedule of costs, ordered approximately 40% of what was being claimed.

In October 2021, a new edition of the Guide To The Summary Assessment Of Costs was issued and in his Foreword, the Master of the Rolls said that he wished to emphasize that the guide “is, as it has always been, no more than a guide and a starting point for judges carrying out summary assessments. This Guide is no different to its predecessors in that it continues to offer assistance to Judges. In every case, a proper exercise judicial discretion has still to be made, after argument on the issues has been heard.”

A piece will appear in forthcoming edition of this Newsletter suggesting that the Guide, and the hourly rates in the Guide, are now far more than a starting point, and for all intents and purposes are normally a finishing point, even on detailed assessments, let alone summary assessments.

The Guide has some useful sections on the relevant law and principles in relation to summary assessments.

“Where the receiving parties legally aided

3. The court should not make a summary assessment of the costs of a receiving party who is legally aided. However, the court may make a summary assessment of costs payable by an assisted person. Such an assessment is not in itself a determination of that person’s liability to pay those costs under s.26(1) Legal Aid, Sentencing and Punishment of Offenders Act 2012.”

“Where the receiving party is represented under a conditional fee agreement

4. Where an order for costs is made before the conclusion of the proceedings and a legal representative for the receiving party has been retained under a conditional fee agreement the court may summarily assess the costs. Although most conditional fee agreements provide that the client is liable to pay the legal representative only if the client succeeds in the proceedings, such agreements commonly provide that the client is also liable to pay the base costs of an interim hearing (but not the success fee) if the client wins at that hearing, whether or not the client ultimately succeeds in the claim. An order for the payment of the summarily assessed costs should not be made unless the court is satisfied that the receiving party is at that time liable under the agreement to pay to the legal representative at least the amount of those costs. If the court is not so satisfied, it may direct that the assessed costs be paid into court to await the outcome of the case or shall not be enforceable until further order.”

“Where the receiving or paying party is a child or protected person

5. The general rule is that costs payable by or to a child or protected party should be the subject of detailed assessment. The court may carry out a summary assessment of the costs of a receiving party who is a child or protected party if the solicitor acting for the child or protected party has waived the right to further costs. If the costs payable consist only of a success fee or a payment due under a damages-based agreement to the child’s or protected party’s solicitor, the court may direct that the costs be assessed summarily: r.46.4(5). Such costs, if incurred in respect of a child in a claim for damages for personal injury, should be assessed summarily only where the damages do not exceed £25,000: r.21.12(1A). The court may carry out a summary assessment of the costs payable by a child or protected party if an insurer or other person is liable to and financially able to discharge those costs.”

STATEMENTS OF COSTS

7. Statements of costs should follow as closely as possible form N260 and must be signed by the party or the party’s representative: Practice Direction 44 para 9.5(3). Forms N260A and N260B may be used in paper, pdf and electronic spreadsheet versions for the costs of interim applications and trials respectively. Where a party files an electronic spreadsheet version it must also file and serve a paper/pdf form.

8. Statements of costs must be filed and served not less than 2 days before a fast track trial and, for other hearings, not less than 24 hours before the start of the hearing: Practice Direction 44 para 9.5(4). Failure to comply with those time limits will be taken into account in deciding what costs order to make and about the costs of any further hearing that may be necessary as a result of that failure: para 9.6. Any sanction should be proportionate. The court should consider what, if any, prejudice had been caused to the paying party and how that should be taken into account. Possible courses to take include a short adjournment to enable the paying party to consider the statement of costs, adjourning the summary assessment to another date, ordering a detailed assessment, disallowing some of the costs which might otherwise have been allowed, or making no costs order at all.

GENERAL PRINCIPLES TO BE APPLIED IN SUMMARY ASSESSMENT

The indemnity principle

17. A party in whose favour an order for costs has been made may not recover more than he is liable to pay his own solicitors: Harold v Smith [1865] H & N 381, 385; Gundry v Sainsbury [1910] 1 KB 645 CA. There are exceptions to the principle, notably costs funded by the Legal Aid Agency and fees payable under certain types of conditional fee agreement.

18. The statement of costs (N260, N260A and N260B)) filed for summary assessment must be signed by the party or its legal representative. That form contains the statement:

The costs stated above do not exceed the costs which the [claimant/defendant] is liable to pay in respect of the work which this statement covers. Counsel’s fees and other expenses have been incurred in the amounts stated and will be paid to the persons stated.

19. The signature of a statement of costs by a solicitor is, in normal circumstances, sufficient to enable the court to be satisfied that the indemnity principle has not been breached: Bailey v IBC Vehicles Ltd [1998] 3 All ER 570 CA. A solicitor is an officer of the court and as Henry L.J. stated:

In so signing he certifies that the contents of the bill are correct. That signature is no empty formality.… The signature of the bill of costs … is effectively the certificate of an officer of the court that the receiving party’s solicitors are not seeking to recover in relation to any item more than they have agreed to charge their client…”

“Time for payment of the summarily assessed costs

20. As a general rule, a paying party should be ordered to pay the amount of any summarily assessed costs within 14 days. Before making such an order the court should consider whether an order for payment of the costs might bring the action to an end and whether this would be just in all the circumstances.”

Written by kerryunderwood

August 24, 2022 at 10:09 am

Posted in Uncategorized

EXTENSION OF FIXED RECOVERABLE COSTS AND INJUNCTIONS

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Fixed recoverable costs will be extended to virtually all civil claims valued at £100,000 or less, with effect from 3 April 2023.

However, in his review of civil litigation costs: Supplemental Report: Fixed Recoverable Costs, Lord Justice Jackson recommended that the new fixed recoverable costs scheme should not yet include Part 8 claims, which are often for non-monetary relief.

This is dealt with in Chapter 7, paragraph 6, at pages 110 to 111 of the Report.

Lord Justice Jackson suggested that there be a review of these matters four years after the spread of fixed recoverable costs, both upwards to £100,000, and across to virtually all civil claims.

If that recommendation is followed, then Part 8 proceedings, with limited exceptions that do not apply here, will not be brought within fixed recoverable costs until April 2027 at the earliest.

However, in Chapter 5 of his Report – The Fast Track – Lord Justice Jackson states that a claim for a declaration or injunction should be treated as the equivalent of a claim for £10,000, with the court having power to vary that figure upwards or downwards.

Costs would then be calculated in accordance with matrix of fixed recoverable costs for fast track claims, which appears at paragraph 5.4, Table 5.2 of Chapter 5 of the Report at page 85.

Consequently, this is a little confusing.

My view is that injunction only proceedings issued under Part 8 will not be subject to fixed recoverable costs, whereas injunction proceedings issued in conjunction with a fast track claim will be covered by fixed recoverable costs.

Lord Justice Jackson gives as an example, a housing disrepair claim where the defendant is ordered to carry out repairs and where is an injunction requiring such work.

That would be covered by the fixed recoverable costs scheme.

Under the new fixed recoverable costs regime, this appears to have the bizarre effect of open costs on a simple Part 8 application, with fixed recoverable costs if the matter is transferred to Part 7 because there is a substantial dispute of fact.

Written by kerryunderwood

August 23, 2022 at 8:23 am

Posted in Uncategorized

CLAIMS EXITING SMALL CLAIMS PORTAL

with 2 comments


There is no provision for transferring a claim from the Official Injury Claim portal, which is the Orwellian name for the Small Claims portal which came in in May 2021, to the Old Ministry of Justice portal, that is the one where you got some money, although it is not specifically prohibited.

My view, on balance, is that if the matter exits the small claims portal, then it does not go to the Ministry of Justice portal, but rather the claimant litigates by issuing proceedings under Part 7.

This is also the answer given on the portal website in response to frequently asked questions.

This issue comes sharply into play in relation to vehicle damage and associated costs, as compared with personal injury.

If there is anyone on the planet who purports to understand the portal in relation to vehicle costs, will they please enlighten me?

Is it barely a secret that most senior judges and officials recognise that the portal is barely comprehensible, and they are concerned about it, as obviously the almost zero take up by litigants in person has implications for the Funnel System, which the Master of the Rolls is so keen on.

A personal injury claim where the channel damages are valued at £5,000 or less, goes on to the new portal, whatever the value of the vehicle related damages.

However, if no personal injury claim is brought the vehicle related damages are taken into account in considering the appropriate track.

This is also the position if agreement cannot be reached, that is that vehicle related damages are not brought into the calculation in the portal, but are as soon as the matter exits the portal.

Consequently, a whiplash claim, now worth just a few hundred pounds, drags a fifty thousand pound credit hire claim down into the small claims track.

Jettison the almost worthless personal injury claim, and it goes straight into multi-track, with full costs, and those costs were far exceeded the whiplash claim.

In any event, in relation to claims that drop out of the new small claims portal, it appears that the court must allocate such a claim to the fast-track or multi-track, and fixed recoverable costs do not apply, as they only apply in relation to Ex-Ministry of Justice portal cases.

In relation to vehicle costs, the guidance at paragraph 5.2.4 states:

“Where these losses are protocol vehicle costs you will be asked to provide details of the losses before you request an offer. Where they are non-protocol vehicle costs they will usually be dealt with outside of this process. If however you are unable to agree settlement of the claim and choose to go to court to ask it to value your claim, you will need to add the non-protocol vehicle costs at that stage.”

That of itself is unclear.

At one level, it suggests, that if either liability or quantum has not been agreed, and obviously if the parties are “unable to agree settlement of the claim”, something has not been agreed, then you can indeed issue Part 7 proceedings.

However, the structure of the new portal means that if liability is not agreed, then you go to court on liability, and if the claimant is successful, the matter returns to the portal for the valuation of damages.

Consequently, the guidance that I have quoted above could be interpreted as meaning that liability must be dealt with, and it is only if damages cannot be agreed that you add on the non-protocol vehicle costs.

On balance, but it is only on balance, my view is that in these circumstances, you can indeed add in the non-protocol vehicle costs and go to court utilizing Part 7 for the whole action.

The whole document and guidance is hopelessly complicated.

Examples could have been given, with different explanations, along the lines of:

“These are the damages taken into account if liability is admitted and this is how your claim proceeds.”

and

“These are the damages that are taken into account if liability is not admitted and this is how the matter proceeds.”

Written by kerryunderwood

August 22, 2022 at 12:35 pm

Posted in Uncategorized

OFFICIAL INJURY CLAIMS PORTAL: A DISASTER THAT THE REST OF THE CIVIL JUSTICE SYSTEM MUST BE SPARED

with 2 comments


Matters on the Small Claims Portal, often wrongly referred to as the Whiplash Portal, and officially The Official Injury Claims Portal, are taking six months on average to settle, even though the number of claims has slumped.

That is according to the Official Injury Claims Portal itself, which covers all road traffic claims where the injuries are valued at £5,000 or less, not just whiplash claims, and those figures show that for the cases closed between April and June 2022, the average time for settlement was 175 days, up from 139 days in the previous period.

Of the claims involving whiplash injuries, just 30% were whiplash only, with the balance being multiple injury cases, where the portal architects abdicated responsibility for deciding how these cases should be valued, as the whiplash element, but only the whiplash element, is subject to a fixed tariff.

I covered this extensively in Issue 14, pages 3 – 8, with Gordan Exall’s piece –

HOW MUCH IS AN ARM AND A NECK? THE ASSESSMENT OF DAMAGES FOR PAIN AND SUFFERING IN MULTIPLE INJURY CASES AFTER THE CIVIL LIABILITY ACT 2018.

When the Government approved and implemented this clueless approach, it said that the issue of mixed claims needs to be determined in court.

That is an absurd approach for any government, or any portal designers, or indeed anyone else to adopt.

It amounts to saying:

“We do not understand how to do this. We cannot draft any clear rules. We do not know what we are doing. We will leave it to the courts.”

Widely regarded as a disaster, the Official Injury Claims Portal, designed to be quick, easy and suitable for Litigants in Person, is very slow, very difficult to understand, even for experienced lawyers, and is being almost totally ignored by Litigants in Person, with over 90% of claimants being legally represented.

Claims are around 30% down compared with the position before the portal was introduced – May 2021 – even though vehicle use has increased significantly following the end of all pandemic restrictions.

Matthew Maxwell Scott, the executive director of the Association of Consumer Support Organisations, said the latest data showed that the system may be reducing claims but is suffering from rising delays.

He said:

“While more complex claims explain some of that increase, 36% of claimants waiting for more than six months to have their claim settled is no advertisement for what we were promised would be a state-of-the-art-digital journey, built around the needs of the consumer.”

MEDCO, the Medical Organisation through which all medical reports in soft-tissue matters must be obtained, has dropped the rule that medical reporters must have a 24 hour answering service.

This was designed to serve Litigants in Person who could only phone out of office hours.

MEDCO said that the volume of work from unrepresented claimants had been expected to be significant, but was in fact at a much lower level.

Around 69 litigants a day use the portal, so spread across all the medical experts, that is not many calls.

These figures have now been fairly constant for the last three quarters.

Of the nine percent of the unrepresented claimants who use the portal, around one third exit it because they find it too complex, according to Matthew Maxwell Scott,  meaning that the true cohort of Litigants in Person is around six percent of the total.

Claims management companies, which are generally structured to deal only with simple claims, and who were heavily involved in this type of work, that is low value road traffic accidents, have almost completely deserted the system with just over one claim a day on average being made by a claims management company.

Matthew Maxwell Scott again:

“While much of the broader trend data is unremarkable, it is becoming ever clearer that the “user-friendly” OIC portal promised by ministers is complex, legalistic and difficult for claimants to use without professional support.

“Unrepresented claimants remain fewer than one in 10 of the total, and one in three of those then exit the portal because they find it too complex. These numbers do not support the view that this a process that is fit for purpose.”

John Hyde writing in the Law Society Gazette on the 31 May 2022 said:

“Of the 243,000 claims lodged with Official Injury Claim, just 23,000 have progressed to settlement. Liability has been admitted in most cases, but taking the next step has proven difficult, as thousands wait for a medical diagnosis (now mandatory) and half of claimants with injuries in addition to whiplash are left in limbo while a test case is selected to work out this issue. Hybrid claims were always going to be a problem when tariffs restricted and reduced compensation and it seems faintly ridiculous we are no nearer to finding a solution a year on from the portal’s launch.”

In addition to all of these matters, the actual technology is not working properly for firms doing volume work with claimant lawyers finding it almost impossible to submit cases in any great number.

The number of law firms doing this kind of work has fallen dramatically, and as set out above, virtually no claims management companies are doing anything, and Litigants in Person are effectively only six percent of the total.

Any pretence that this system was designed to provide Access to Justice, or is capable of doing so, is absurd, and fully justifies the criticisms made by huge numbers of lawyers and others, that this was a system implemented by the Government, to be run by the insurers and for the insurers and in return for favours done by insurers to the governing party.

John Hyde again:

“The industry is paying for the portal essentially on the basis that a good chunk of people would be forced to do without a lawyer and would need help. Like a property developer offering to build a community centre in return for permission to build a 50-storey skyscraper, this was a quid pro quo arrangement with the government.

Except in this case, the community centre is a white elephant. The portal was designed to cater for litigants in person and – at most – just 9% of claimants are using it without a lawyer.

To put into language they might understand, insurers have bought travel cover at great expense, only for everyone to refuse to leave home.”

No one, that is neither the Government, the Civil Justice System, nor the insurers has said how much the system is costing the insurers.

Thus, we have a compulsory part of the Civil Justice system which has been privatized to a party that is always the defendant in such proceedings, and who refuses to say how much money they are putting into it.

This is seen as part of a wider attack on the Civil Justice System, with the Government having announced that it will force non-judicial telephone mediation on parties with claims of under £10,000, with the aim of introducing it for all of County Court Claims, potentially of up to round £250,000.

In addition, from the 1 June 2022, the right to a trial in a small claims matter has been abolished, with the Judge able to decide the matter on the papers, even if one, or both parties want a real trial.

The irony of these assaults on human rights and the work generally done by District Judges, who themselves have to operate with hopeless technology in courts that are falling down, is that it is likely severely to delay, if not wreck, the digital Justice System so much admired by some of the senior Judiciary, who of course, do not have to deal with it.

Having said all of that, clearly an online system, such as the old Ministry of Justice Portal which works very well, is desirable, and the problem here is that the new portal system was handed over to one of the parties.

It is the equivalent of handing over the administration and management of the Employment Tribunal system to the Socialist International.

I fully support proper online procedures, subject to them being truly independent and judicially monitored, and also subject to the important point that those who are unable or incapable of using such technology should be fully provided for.

There is no joined-up thinking here.

It was proposed that Lasting Powers of Attorney become fully digital, but it was pointed out that around 5.5million adults, generally those over fifty, and statistically more likely to make Lasting Powers of Attorney, had no access to the internet.

In addition, there are adults with educational and learning difficulties.

This whole issue needs to be thought through with much greater care, and with heavy involvement of experts, and ultimately the decision should be a political one and not a judicial one.

As with so many other things, the risk here is that a great idea has been wrecked by privatization.

Written by kerryunderwood

August 19, 2022 at 8:50 am

Posted in Uncategorized

SOLICITORS REGULATION AUTHORITY FINING POWERS UP FROM £2,000 TO £25,000

with 2 comments


The fining powers of the Solicitors Regulation Authority are to be increased from £2,000 to £25,000 in what is seen as part of an ongoing programme to force all small firms of solicitors out of the market.

Fixed penalties will be introduced for what are perceived as lower level breaches, but there will be a consultation on this aspect.

The Law Society expressed concerns about the Solicitors Regulation Authority “acting as investigator, prosecutor and judge, in potentially many more serious and significant cases which currently go before the SDT.” [Solicitors Disciplinary Tribunal].

Solicitors will retain the right of appeal to the Solicitors Disciplinary Tribunal.

Ethnic minorities, men, and older solicitors and over-represented in the enforcement processes.

Solicitors Regulation Authority Guidance will be amended to state that cases involving sexual misconduct, discrimination or harassment should result in striking-off, or suspension.

Written by kerryunderwood

August 8, 2022 at 11:47 am

Posted in Uncategorized

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

with 5 comments


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

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