Most Conditional Fee Agreement (CFA) challenges follow a well-trodden path. However, occasionally a new variation arises where there is no authority directly on all fours. This happened in the recent case of Smith v Carpetright plc, heard by Regional Cost Judge Sparrow in Norwich County Court.
The Claimant had entered into a CFA with Godfrey Morgan solicitors. It was a condition of the, now revoked, CFA Regulations 2000 that for a CFA to be valid the solicitor must advise the client, before the CFA is entered into, whether they recommend a particular method of funding the claim and if they recommend a particular ATE insurance policy their reasons for doing so.
The CFA in question recommended an ATE policy with Amicus. Witness evidence was served during the detailed assessment proceedings that stated that this was the policy that was also orally recommended to the client. However, the CFA itself then went on discuss an Accident Line Protect insurance policy and stated that such policies are “only made available to you by Solicitors who have joined the Accident Line Protect Scheme”.
Gibbs Wyatt Stone acted for the Defendant and argued that there had been a breach of the Regulations in that it was inherently confusing as to which policy was being recommended (whether an Amicus policy or an Accident Line Protect policy) and that there had been a total failure to explain why the Amicus policy was being recommended, if it was, given the only details given had related to the Accident Line Protect policy.
The Judge held that there was real confusion in the written CFA as to what was being recommended and the likelihood was that anybody reading the CFA would consider that Amicus and Accident Line Protect were one and the same. Regardless of whether or not clear oral advice had been given, the Regulations required the advice concerning the ATE recommendation to be in writing and this had not been clearly done. This amounted to a breach which undermined consumer protection and was therefore a material breach. The CFA was held to be invalid and costs of over £90,000 were disallowed.
The Ministry of Justice has just announced (see letter) that claimant and defendant representatives have “reached broad agreement on the detail” of the new Claims Process for RTA personal injury claims with a value of between £1,000 and £10,000.
The Civil Justice Council has mediated an agreement on the fixed recoverable costs which will depend on which stage of the new process each case reaches. The agreed fixed costs are:
£400 for Stage 1 (the claimant solicitor completes the claim notification form and sends it to the insurer who may admit/deny liability);
£800 for Stage 2 (where liability is admitted, the claimant obtains a medical report and the process continues with offers and negotiation of a settlement to a strict timetable); and
£250 paper hearing / £500 oral hearing for Stage 3 (where the parties cannot agree a settlement and the case goes to court).
The draft rules, practice directions and pre-action protocols have yet to be drafted (and the devil will be in the detail) but the implementation date being aimed for is April 2010.
Another chunk of work is likely to be lost to costs professionals as a result of these changes.
The Gazette (click link) reports that the Association of Personal Injury Lawyers (APIL) has walked out of talks on extending fixed costs in personal injury cases. This mediation was put together at the request of Lord Justice Jackson as part of his Costs Review. It seems inevitable that his final report will include a recommendation that fixed fees are introduced for all stages of the fast-track in personal injury claims and this mediation was intended to lead to an agreement as to the appropriate figures.
It is somewhat hard to interpret this new development. It may simply be initial posturing on the part of APIL. It is no secret that APIL opposes the extension of fixed fees; they said as much in their response to the Jackson Preliminary Report. If they simply wished to scupper the mediation, it would have made more sense to continue to play along and undermine the process from within. Without APIL’s involvement what will happen? It seems very unlikely that Jackson LJ will abandon this central part of his reform program simply because one interest group does not want to cooperate. On the other hand, will any figures now produced lack credibility? APIL runs the risk that the process will move forward regardless but they will lose the opportunity to influence the final figures.
The Claims for you (a trading name of Wixted & Co solicitors) website claims that they succeed in 98% of their accident claims. If true, this is an impressive success rate. However it does raise a number of issues:
1. Is this success rate not a reflection of the quality of the lawyers who work for this firm but rather a reflection of how risk adverse they are? Do they only take on cases they consider to be dead certs and wouldn’t touch with a ten-foot barge pole anything that looks as if it has the slightest chance of failure?
2. If this level of success is even remotely typical of personal injury firms, where on earth did the fixed success fee figures come from? The ready-reckoner produces a success fee of 2% where the prospects of success are 98%, but the fixed success fee for even straightforward RTAs that settle pre-trial is 12.5%.
3. For non-fixed success fee claims, what level of success fee does this firm claim? What do they argue on detailed assessment to support their success fees? Do they claim an average success fee of 2% to reflect their success rate? If any readers of the Legal Costs Blog have any recent experience, let us know.
Lord Justice Jackson’s Preliminary Report on Civil Litigation Costs (see previous post) focuses on the perceived problems that have arisen in recent years in relation to legal costs: “There is no doubt that litigation over costs has increased dramatically in recent years, and that this growth is one of the driving factors behind the present review. Whilst many such disputes concerned issues which would need to be resolved under any system which involves costs-shifting, the disputes over the enforceability of conditional fee agreements have generated more litigation, arguably to less useful purpose, than any other. … [L]engthy detailed assessment hearings (largely devoted to legal arguments about recoverability and other technical challenges) still abound. This continuance of technical battles, albeit on changing fronts, appears to be attributable to the huge sums of costs which are in play. Both in the field of personal injury and in other areas, the Costs War is still being fought with some vigour.”
The Report goes on: “Taken collectively, the law reports of the last decade present the unseemly spectacle of endless and expensive squabbles about how much money should be paid to lawyers. … The question must be asked whether the Costs War either serves the public interest or benefits the profession as a whole. If the answer to this question is no, then consideration must be given to what further measures (beyond those already adopted) should be taken in order to stamp out such litigation. … In commenting on the issues raised in Phase 1 of the Costs Review, Professor Ian Scott (general editor of the White Book) stated: ‘I do fear that the profession to which I belong has lost its soul and is far too preoccupied with making money. Further, I think it is capable by its actions of killing the goose that has laid the golden egg. Another thing I feel strongly about is the shocking squandering of scarce court resources on refereeing of disputes about costs’”.
In addition to some of the radical proposals for dealing with these perceived problems, such as increased fixed fees and an end to two-way costs shifting, a number of the options up for consideration include changes to the current detailed assessment process. Some of the problems and options highlighted by the Report include:
1. “The most frequently expressed view is that the costs of detailed assessment and the court fees charged for it are often disproportionate to the amounts at stake in the main proceedings.”
2. “What is required is a bill which gives relevant information to the court and to the paying party and which is transparent. The current form of bill makes it relatively easy for a receiving party to disguise or even hide what has gone on.”
3. “Whilst detailed points of dispute may be necessary in high value complex cases, there is no such necessity in low value, straightforward bills.”
4. “A major problem in the SCCO is the fact that many detailed assessment cases settle very late in the day when it is too late to appoint another case in place of the settled case.”
5. “If a matrix, scale or tariff is in place for fast track cases there is no need for points of dispute or any reply. Depending on the structure of the fast track costs scheme it may be possible to do away with detailed assessment of such cases altogether. In order to cater for exceptional cases there should be an escape clause enabling a receiving party [or paying party] who feels that the scale allowance is too low [or too high] to apply to the court for a detailed assessment subject to a costs risk, e.g., if the assessment does not result in an increase [or decrease] of 20% or more the party applying will bear the costs of the detailed assessment.”
6. “[I]t is suggested that the Costs Practice Direction should be amended to the effect that in fast track cases points of dispute should not extend to more than three pages. … In low value cases it may be possible to dispense with points of dispute altogether, or at least to limit them to points of principle rather than quantum.”
7. “There should be a requirement that the paying party should make an offer in respect of the costs at the same time as serving points of dispute. Where the points of dispute assert that no costs should be payable, eg because of a breach of the CFA Regulations, a provisional offer should be made on the basis that the preliminary issue is decided in favour of the receiving party.”
8. “There appears to be no reason why Part 36 should not apply to detailed assessment proceedings in the same way as it applies to the substantive proceedings. This would provide greater certainty than the present provision in the rules that any offer to settle ‘may be taken into account’.”
9. “For bills of up to say £50,000 it may be possible to have a system of provisional assessment whereby the costs officer considers the bill and supporting papers in the light of the points of dispute.”
10. The decision in Crane v Canons Leisure Centre  EWCA Civ 1352 may need to be reversed.
All these proposals are designed to reduce costs disputes and reduce the cost of costs disputes. None of this is good news for the average law costs draftsman or other costs professional.
One of the more niche topics that Lord Justice Jackson’s Costs Review is examining is e-disclosure. This is a specialist area and I do not propose to comment on the issues and problems that arise. Rather, I would suggest that those readers who are interested in this topic visit The e-Disclosure Information Project website where there is detailed consideration of this area. There is also an interesting post on that site concerning legal costs and the detailed assessment process.
My sources in the legal costs world inform me of the forthcoming publication of a new book on the subject of legal costs. This news may not immediately set the pulse racing, especially when I tell you that I am not the author. However, this book promises to be different from the established titles on the market and is written by a highly regarded costs counsel. If this book is half as good as initial rumours suggest, it has every chance of knocking Cook on Costs from the top of the table as being the indispensable costs guide.
I’ll keep you updated.