Kerry Underwood

FIXED COSTS AND THE BAR: FURTHER THOUGHTS

with 2 comments


You can book onto my Fixed Costs Autumn Tour – here

Lord Justice Jackson’s Fixed Recoverable Costs Report was published on 31 July 2017 and is available here.

This piece develops some thoughts contained in FIXED COSTS AND THE BAR: POST 2 and in due course will be incorporated into that post.

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 in my original post.

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 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 says that that uplift should be either 30%, or 40%.

Assuming that it is 40%, that would obviously give a recoverable fee of £14,000.00, 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 at all that Nizami v Butt does not apply when open, indemnity costs are awarded.

However, the whole point of the 40% 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 £14,000.00, so as to satisfy the indemnity principle if the fixed 40% Part 36 uplift is achieved.

Subject to the success fee not exceeding 100% of those base costs of £14,000.00, 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 £14,000.00 fee to counsel, the parties can agree that that will only be £10,000.00 in those circumstances.

The key is a properly drafted agreement and I can help J.

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 [2002] Kingston upon Thames County Court 17 May 2002 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 assistant solicitor or trainee solicitor or whatever.

What I think is not permissible is to present a bill stating that counsel’s fee of £10,000.00 has been incurred if in fact counsel has only been paid £5,000.00.

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.

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, probably on 1 October 2018.

Make no mistake – there are cases in solicitors’ offices now which will be subject to the new regime.

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Written by kerryunderwood

August 4, 2017 at 2:30 pm

Posted in Uncategorized

2 Responses

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  1. Reblogged this on | truthaholics and commented:
    “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.

    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.”

    truthaholics

    August 4, 2017 at 2:49 pm

  2. daveyone1

    August 5, 2017 at 8:30 pm


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