Costs draftsmen and other costs professionals are currently living through an interesting period (or possibly that should read "worrying period").

The Legal Costs Division of recruitment agency Adept Recruitment have been sending out marketing literature reporting: "As the 2nd Quarter of 2009 draws to a close we continue to see high levels of Legal Costs Recruitment throughout the UK. Despite the economic downturn many of our Clients have continued with ambitious expansion programmes, whilst some have opened large, new departments in major cities as their workload continues to increase". Sounds like good news, but there is a catch.

In previous postings I have commented on the potential increase in work for costs draftsmen (link to post) that may result from the current economic downturn. However, it is far too early for this work to have yet worked its way through to the legal costs industry. There is no "extra" work out there beyond what there was a few years ago. Indeed, some work, such a RTA work, has dramatically declined.

So what is happening? The short answer is that some firms are taking work at the expense of others. This has certainly been the pattern over the last five years or so in relation to defendant work. A number of the previous big players in the legal costs negotiating industry have either disappeared or shrunk dramatically. This, in part, has been caused by reductions in real terms in work volumes but has also been caused by work moving to new providers. A similar process seems to be in progress now in relation to more traditional costs draftsmen and particularly those in the claimant field. There are one or two large players who have recently been engaged in aggressive and successful expansion plans. Over recent months I have heard from claimant costs draftsmen who have told me how they are feeling the pinch as a result of the success of their rivals' expansion programmes. The claimant costs industry is going down the same road the defendant side previously travelled where it is becoming dominated by a smaller number of large players. Whether that is good news or bad depends on your perspective.

All this redistribution of work may be interesting but will potentially become an irrelevant sideshow if some of the suggestions in the Jackson Review see the light of day. More on that subject shortly.

Costs assessment not a "trial"

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The ingenuity of parties to litigation when it comes to arguments over legal costs knows no limits.

The fixed success fee regime which applies to new RTAs allows solicitors a success fee of 12.5% if “the claim concludes before a trial has commenced or the dispute is settled before a claim is issued” or 100% “where the claim concludes at trial”. The same rules, but with different figures, apply to new EL and EL disease cases. A “trial” is defined as being “the final contested hearing or the contested hearing of any issue ordered to be tried separately”.

Some claimant solicitors seeking to maximize their success fees have sought to argue that if a matter proceeds to assessment of the costs then that is a “trial” and their costs therefore attract the 100% success fee even if the substantive claim settles pre-trial. This was the situation that arose in the case of Thenga v Quinn [2009] EWCA Civ 151 (Lawtel link). Judgment was entered in default for the claimant. The matter was listed for an assessment of damages hearing but quantum was agreed before the hearing and the defendant agreed to pay the claimant’s costs. The matter was proceeding in Bury County Court where a practice has apparently developed of cases not being removed from the list but remaining listed to enable a summary assessment to take place. (Considerable doubt was expressed by Lord Justice Wilson as to the appropriateness of this practice given summary assessment is only meant to be conducted by a judge who has heard the actual case.) The case therefore proceeded to a summary assessment where the judge at first instance was persuaded that this therefore amounted to a “final contested hearing” and a 100% success fee applied.

On appeal, the circuit judge disagreed with this conclusion and held that the summary assessment was not part of the “final contested hearing”, the claim had been settled before a trial had commenced and the success fee was limited to 12.5%. Lord Justice Wilson, refusing permission to appeal, agreed with the circuit judge and concluded that it was clear that “final contested hearing” relates to the substantive claim (although would include a disputed hearing as to whether to award a party costs in principle).

This is a sensible decision which slaps down at least one of the perverse outcomes the fixed success fee regime had potentially thrown up.

As anticipated, the new RTA claims process will not be ready by the original date of October 2009 due to problems agreeing how the scheme will work. A new date of April 2010 has now been set. 

This latest news coincides with Lord Justice Jackson's recent comments commending the German costs recovery model. With his preliminary report on the future of legal costs about to be published it seems increasingly likely that some form of extended fixed fees will be recommended. That, in turn, is likely to have an impact of the new claims process. (Read more.)

Expect further delay and uncertainty.

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