FIXED COSTS EXTENSION, VULNERABILITY AND QUALIFIED ONE-WAY COSTS SHIFTING

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.

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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.

DELEGATING WORK TO CHEAPER FEE-EARNERS

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.”

SOLICITOR AND OWN CLIENT HOURLY RATE

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.

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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.

GUIDELINE HOURLY RATES: ARE THEY NOW TRAMLINES?

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.

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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.

THE BAR AND FIXED COSTS

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	3	4
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.

10 September 2022 is World Suicide Prevention Day

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.

Private Client Solicitor / Legal Executive

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.

INDEMNITY PRINCIPLE REQUIRES LIABILITY, NOT PAYMENT

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.”