In the past, when meeting people for the first time, I have always dreaded being asked what it is I do for a living. To a non-lawyer there is no easy way to explain the role of a defendant costs consultant. However, the recent furore over MPs’ expenses has made my task easier.
Now, when I get asked this question, I can respond: “You know the way when MPs were allowed to police their own expenses they claimed for the most outrageous things? Well, claimant lawyers are much the same when it comes to their legal billing. I’m the type of lawyer whose job it is to police claimant lawyers and stop them from claiming for their duck house or to have their moat cleaned”.
If any readers have a better summary of a defendant law costs consultant’s role, that is remotely printable, please feel free to add under comments.
The, now revoked, Collective Conditional Fee Agreement Regulations 2000 state:
“5. (1) Where a collective conditional fee agreement provides for a success fee the agreement must provide that, when accepting instructions in relation to any specific proceedings the legal representative must prepare and retain a written statement containing -
(a) his assessment of the probability of the circumstances arising in which the percentage increase will become payable in relation to those proceedings ("the risk assessment");
(b) his assessment of the amount of the percentage increase in relation to those proceedings, having regard to the risk assessment; and
(c) the reasons, by reference to the risk assessment, for setting the percentage increase at that level.”
In Various Claimants v Gower Chemicals (Cardiff County Court, 28/2/07) the paying party sought to argue that a failure to prepare a statement of reasons in accordance with Regulation 5(1) rendered the retainer invalid and all costs should therefore be disallowed. That argument was rejected on the basis that “the natural and ordinary meaning of the regulation is that there must be a provision in a CCFA that complies with the specification set out in the regulation. Regulation 5(1) does not additionally require that the prescribed provision must be performed”.
Is that an end to the story? Not quite. The ever ingenious Gibbs Wyatt Stone recently acted for the Defendant in an EL claim (Middleton v Mainland Market Deliveries Ltd (Southampton CC, 20/10/09)). The Claimant's Bill claimed a 100% success fee on the basis that the fixed EL success fees had been applied to the case when the claim was accepted under the CCFA and the matter had settled at trial. In fact, the date of the accident was such that it did not fall within the fixed success fee regime. The judge accepted that fixed success fees did not apply as a matter of law and that the Court could not simply adopt the fixed success fee figures when assessing the success fee in this case (see Atack v Lee  EWCA Civ 1712).
Costs Practice Direction 32.5(1)(b) requires a receiving party to serve with his Bill:
“a statement of the reasons for the percentage increase given in accordance with Regulation 3(1)(a) of the Conditional Fee Agreements Regulations or Regulation 5(1)(c) of the Collective Conditional Fee Agreements Regulations 2000. [Both sets of regulations were revoked by the Conditional Fee Agreements (Revocation) Regulations 2005 but continue to have effect in relation to conditional fee agreements and collective conditional fee agreements entered into before 1st November 2005]”
The Claimant in this case had served a document, prepared at the time the case was accepted, that gave a detailed analysis of the various strengths and weaknesses of this case and then stating that the success fee would be 27.5% if the claim settled pre-trial of 100% if settled at trial.
However it was argued for the Defendant that this document did not properly comply with the requirements of 5(1)(c). That section required “the reasons, by reference to the risk assessment [emphasis added], for setting the percentage increase at that level”. Because the solicitors had simply adopted the fixed success fees, they had not undertaken the “risk assessment” required by 5(1)(a). Regulation 5 is a 3-stage process. To comply with 5(1)(c) requires the earlier steps to have also been undertaken. As such, it was argued there was a breach of CPD 32.5(1)(b) and that, by virtue of CPR 44.3B(1)(d)(i), the success fee was therefore not recoverable.
This was a different argument to the one run in Gower Chemicals. That argument was based on there being a breach of the CCFA Regulations which rendered the whole retainer invalid and all costs being irrecoverable. The argument advanced in this case was not that there was a breach of the Regulations, but that there was a breach of the detailed assessment disclosure requirements and the success fee alone was irrecoverable.
The judge accepted the Defendant's submissions and disallowed the success fee.
If this decision were to be followed by other judges, a very large number of other cases would potentially be affected. A large number of “risk assessments” prepared in CCFA cases do not strictly follow the 3-stage process. Interestingly, there is a possible argument that the requirement to comply would have existed even if this was a fixed success fee case. The CCFA in place pre-dated the revocation of the Regulations (as most still do). There is nothing in CPD 32.5(1)(b) that disapplies the rule in fixed success fee cases. Although Lamont v Burton  EWCA Civ 429 and Kilby v Gawith EWCA Civ 812 are authority for the proposition that the courts have no discretion as to whether to allow fixed success fees, does this extend as far as overriding the disclosure or notification requirements? If a party fails to comply with CPD 19.4(1), for example, surely they can't recover the success fee notwithstanding that it is a fixed fee case. Does this also apply to CPD 32.5(1)(b) in its current form?
In the same case, Counsel had entered into his CFA after liability had been admitted. The CFA did not put Counsel at risk in relation to Part 36 offers (despite his risk assessment being prepared on the mistaken basis that it did). Nevertheless, the fixed success fee figures had also been applied producing a claim for 100% as the matter proceeded to trial. The judge accepted that the success fee should be reduced to the 5% figure suggested in paragraph paragraph 24 of C v W  EWCA Civ 1459.
An article of mine was recently published in the Solicitors Journal on the future of the legal costs industry. For those who haven't already read it, it can be found here (click link). Sure to ruffle a few feathers.
I previously mentioned (see post) the forthcoming publication of a new book on the subject of legal costs. I suggested that this book might become the indispensable book on the subject. I have now had the great privilege of seeing a working draft of the book and I was wrong. There is no question as to whether this book will become the bible of the costs world - it will. I really can't begin to explain how excited I am about this new book, and one doesn't often see the word "excited" appear in the same paragraph as "legal costs".
The book is being written by highly respected specialist costs counsel Dr Mark Friston.
The following letter was published in the latest edition of the Law Gazette:
“Rhonwen Barraclough’s letter (8 October) complained about Lord Justice Jackson’s recent suggestion of increasing the small claims limit if a deal cannot be done on fixing legal costs in fast-track claims. Among the various reasons put forward as to why this was a bad thing, the most desperate was:
‘There is also the prospect of losing even more high street practices, given the constant onslaught from professional indemnity insurance and farcical legal aid rates. Like it or not, personal injury is big business, with the majority of fee income going back into the economy in the form of taxes, VAT, wages and to other associated businesses. Has the practical impact of the reforms been considered in that context at all? Can the government really afford to lose the revenues generated by PI?’
Criminal behaviour is big business, keeping employed criminal lawyers, police, prison offices, security firms and so on, and generating various taxes as a result. However, one would have to be going it some to argue that the government should be very cautious about trying to reduce crime.
What next? The Association of Personal Injury Lawyers campaigning for more dangerous driving, unsafe work practices and more potholes in an effort to bail the government out of its current financial difficulties?
Forget high street practices, what about your average poor costs consultant if fixed fees are introduced? Now that is serious.
The New Law Journal recently reported on nearly 400 lawyers, legal professionals and friends taking part in the 10k Manchester Legal Sponsored Walk and raising a very respectable £20,000 for charity. This works out at £50 per person taking part.
Let's assume it takes an average of 2 hours to complete a 10km walk. Let's then allow another hour to get to and from the route of the walk. Let's also assume that each person taking part in the walk spent an hour going around their office signing up sponsors and then collecting the money. In turn, an hour of their colleagues' time would have been taken up being signed up and paying the sponsorship money. Even if we assume that no training was done for the event, and if we ignore the time taken organising the event, approximately 5 hours of time would have been spent for each £50 raised. That is an hourly rate of £10. The current Guideline Hourly Rate for a Grade C fee earner in Central Manchester is £158.
Obviously, this type of charitable event is not simply about raising money (it's also about raising awareness of important charities, building a sense of community, having a fun day out, etc) but it does make one wonder what a lawyer's time is really worth.
In a previous posting (read here) I discussed the old rules relating to providing information about the funding of a claim. The latest update to the Civil Procedure Rules has made important amendments which came into force on 1st October 2009.
The old CPR 44.3B read:
“(1) A party may not recover as an additional liability –
(c) any additional liability for any period in the proceedings during which he failed to provide information about a funding arrangement in accordance with a rule, practice direction or court order”
The new wording of CPR 44.3B is:
“(1) Unless the court orders otherwise, a party may not recover as an additional liability –
(c) any additional liability for any period during which that party failed to provide information about a funding arrangement in accordance with a rule, practice direction or court order;
(e) any insurance premium where that party has failed to provide information about the insurance policy in question by the time required by a rule, practice direction or court order.
(Paragraph 9.3 of the Practice Direction (Pre-Action Conduct) provides that a party must inform any other party as soon as possible about a funding arrangement entered into before the start of proceedings.)”
These changes fall into four categories:
1.The wording “in the proceedings” is deleted and the reference to the new wording of the Practice Direction (Pre Action Conduct) makes it clear that notice must now be given pre-proceedings.
2.The insurance premium provision deals with the consequence of not giving the information discussed below.
3.The addition of the new wording “unless the court orders otherwise” is perhaps surprising. It was previously clear that failure to comply with the notification provision produced an automatic sanction in that the additional liability was not recoverable (in the absence of a successful application for relief from sanctions). It now appears to be in the general discretion of the court as to whether to allow the additional liability despite the breach, although the starting point is obviously non-recoverability. What is strange is that the new wording is followed by the same note that previously appeared: “Rule 3.9 sets out the circumstances the court will consider on an application for relief from a sanction for failure to comply with any rule, practice direction or court order”. If the court now has a general discretion there would be no need to formally make an application for relief from sanctions. Or, is the wording “unless the court orders otherwise” meant to refer to the situation where a successful application has indeed been made, but not otherwise? We'll no doubt have to wait for the first decisions on the correct interpretation.
4.The word “he” is replaced by the non-sexist “that party” (so as not to upset any chicks reading).
Paragraph 9.3 of the Practice Direction (Pre-Action Conduct) now reads (amendments underlined):
“Where a party enters into a funding arrangement within the meaning of rule 43.2(1)(k), that party must inform the other parties about this arrangement as soon as possible and in any event either within 7 days of entering into the funding arrangement concerned or, where a claimant enters into a funding arrangement before sending a letter before claim, in the letter before claim.”
For the reasons I gave in the previous posting on this subject, I am of the view that these changes clarify, rather than change, the requirements concerning pre-proceedings notification (although the corresponding transitional provisions might suggest the contrary).
An important change has been made to the Costs Practice Direction in respect of staged After-the-Event (ATE) premiums. CPD 19.4(3) now reads:
“Where the funding arrangement is an insurance policy, the party must –
(a) state the name and address of the insurer, the policy number and the date of the policy and identify the claim or claims to which it relates (including Part 20 claims if any);
(b) state the level of cover provided by the insurance; and
(c) state whether the insurance premiums are staged and, if so, the points at which an increased premium is payable.”
What is not 100% clear is what the consequence would be of failing to give notification of the fact the policy is staged or to give the trigger points. Would the receiving party lose all premiums or would they still be able to recover the first stage premium (on the basis that the paying party can be no worse off in respect of this first premium even if they were not notified of the staging; the prejudice comes from not having the opportunity to settle the claim before the subsequent premiums become payable)? More test litigation ahead for costs draftsmen and other costs professionals.
It should be pointed out that none of these changes affect those acting under discounted CFAs\CCFAs without a success fee (usually defendants). There is no need to provide notice of funding in this situation because the full hourly rate payable in the event of a win is not treated as being an additional liability (see Gloucestershire CC v Evans  EWCA Civ 21).
There are also important changes to the rules concerning ATE premiums in publication proceedings although, frankly, if you work in that niche area you should already be more than aware of those changes.
I regret to have to announce the closure of the Supreme Court Costs Office (SCCO). Actually, I'm exaggerating somewhat. With the creation of the new Supreme Court, the SCCO has been renamed the Senior Courts Costs Office. The updated CPR uses the shorter term "Costs Office".
The original name made it sound like a chicken dish and the new name makes it sound like a pensioner. At least the acronym remains the same. Any suggestions for a better name?
Contrary to all logic and common sense, the Legal Costs Blog appears to have acquired a not insignificant readership.
The Solicitors Journal, aimed not just at solicitors but lawyers generally, claims that its website attracts over 34,000 users a month. Insurance Times, aimed at the whole insurance industry, claims over 45,000 users per month. Both websites have excellent and comprehensive content. The Gibbs Wyatt Stone website attracts over 12,000 users per month. The majority of this traffic is attracted to the Legal Costs Blog pages. Gibbs Wyatt Stone are a niche firm operating in a niche area of the law. These figures suggest one of two things. First, it may be that the figures quoted by the Solicitors Journal and Insurance Times are not as impressive as they first appear. Alternatively, the Legal Costs Blog is attracting a surprisingly high readership given the nature of its content. I'll leave readers to make up their own minds as to which of these it is.
It can safely be assumed that a large proportion of the readership are those who work within the English legal costs world. However, it appears that this blog has a wider reach. We have one subscriber from the High Court in Anguilla in the Caribbean. The other week I was contacted by a charming chap from the Czech Republic asking for book recommendations on the subject of legal costs as this was his "hobby" (and I thought I was the only one).
A comment recently added to one of my previous posts concerning the Jackson Costs Review complained that this was "a most biased defendant based blog". Well, yes. That's the point. Unfortunately, the comment was posted anonymously and so we will never know who expressed that view (although I'm sure there are plenty who share it). Strangely, a specialist costs barrister who had recently seen the blog suggested I should consider "making it more overtly for defendants". Goodness knows how some people would react if I did make it more defendant leaning.
On a related topic, it has recently been reported that Rupert Murdoch's News Corporation (whose publications include The Sun and The Times) is set to start charging online customers for news content across all of its websites. The internet has increasingly been viewed as a source of unlimited free information (in theory paid for by advertising). The tide may be starting to turn. You'll be pleased to know that we currently have no plans to start charging for the blog. Remember, you can subscribe to the blog by entering your email address in the box part way down the web page and receive posts straight to your inbox. If you get tired of receiving them, just unsubscribe.