The Legal Aid, Sentencing and Punishment of Offenders Bill, implementing the Jackson proposals, comfortably passed its second reading in the House of Commons yesterday with no signs of a Common’s rebellion.

However, I am grateful to Professor Dominic Regan’s Blog for pointing out that the act does not seem to deal with qualified one-way costs shifting, the 10% damages uplift or proportionality changes. Although damages could be increased by judicial diktat, it is hard to see how the other reforms can happen without clear legislation.

Perhaps the government is going to end recoverability of additional liabilities but will quietly drop the corresponding introduction of qualified one-way costs shifting.

Lord Justice Henry's held in Bailey v IBC Vehicles [1998] EWCA Civ 566 that:

“The signature of the bill of costs under the Rules is effectively the certificate by an officer of the Court that the receiving party’s solicitors are not seeking to recover in relation to any item more than they have agreed to charge their client under a contentious business agreement. The Court can (and should unless there is evidence to the contrary) assume that his signature to the bill of costs shows that the indemnity principle has not been offended.”

Costs lawyers and law costs draftsmen who have worked in costs for any length of time will have their own views as to the wisdom of the idea that solicitors can be trusted to self-certify their bills.

However, an interesting article in Solicitors Journal, under the heading “John Taylor investigates why solicitors are so prone to committing extraordinary feats of fraud”, casts further light on the subject.

Recent research revealed:

“solicitors, or trainee solicitors on which the research was based, show no greater ethical reluctance in respect of what might be best described as day-to-day petty illegal acts – for example, travelling on the train without paying, disobeying road signs, minor fiddling of expenses, claiming small amounts of overtime which they haven’t worked – than the public in general. ...

Law attracts the type of person who scores highly on the mild social deviance scale. … There is a high correlation between mild social deviance (such as being paid in cash without paying tax or travelling on trains without paying) and attraction of prestige and status. This indicates that people who are attracted to law because of its status would also be prepared to commit minor frauds.”

Something for costs judges to think about when the receiving party next seeks to rely on the signature to the bill...

The muddled thinking coming from the anti-Jackson movement continues, as charmingly shown by Nigel Muers-Raby, Chairman of the Consumer Justice Alliance (Law Society Gazette, letters, 26 May). His letter begins:

“Your recent article reporting on the increased number of medical negligence claims in 2010 is interesting, but the Medical Defence Union reaches a highly speculative conclusion. The MDU offers no firm evidence for its suggestion that ‘no win, no fee’ arrangements are behind the increase in medical negligence claims reported in 2010.”

Fair enough. The point being made here is that there is no evidence that ‘no win, no fee’ arrangements increase the number of medical negligence claims that are brought.

And then, with just one sentence separating this argument, we are presented with:

“There is no doubt in our minds that someone who has suffered an accident will find life much tougher if ‘no win, no fee’ agreements are lost: ultimately it will hinder their ability to seek fair and reasonable access to justice.”

We are now presented with the argument that ‘no win, no fee’ arrangements enable more medical negligence claims to be brought than would otherwise be the case.

Either ‘no win, no fee’ agreements have no effect on the number of claims brought or they increase the number. What they can’t do is both these things at the same time.

I can understand the anti-Jackson lobby trying to mobilise whichever argument suits them on any given occasion but surely they have the sense not to use contradictory arguments in the same letter. And they wonder why Jackson totally ignored them.

One aspect of the preliminary issues judgment in Motto & Ors v Trafigura Ltd & Anor [2011] EWHC 90201 (Costs) (15 February 2011) that I did not quite understand concerned the cost of security.

The claimants’ solicitors had needed to pay for security for their employees whilst working in a dangerous part of the world. These costs were claimed as a specific category of legal costs. Master Hurst allowed such costs and said:

“The decision which I have reached in relation to hourly rates does not reflect an additional element for the cost of security in the Ivory Coast, but rather, as Mr Williams submits, the overheads of a firm based in Clarkenwell. Had the hourly rates included an element for overseas security, I should have had to hear argument and details before arriving at a final figure. In the event, therefore, to the extent that it is reasonable and proportionate, the cost of security is recoverable.”

However, when dealing with the issue of what hourly rates to allow he ruled:

“In my view it is also necessary to take into account the inevitable increase in overheads that will be incurred by having to employ people to work in dangerous conditions overseas.”

Perhaps this was meant to mean that staff might have had to be paid more than normal to work in dangerous conditions, and thus the firm would be paying higher salaries (so incurring higher overheads) than would normally be the case. However, this might have been worded more clearly.

The amount of the claim for costs in the case of Motto & Ors v Trafigura Ltd & Anor [2011] EWHC 90201 (Costs) (15 February 2011) - £104,707,772.72 – was truly eye-watering. This was, on any analysis, a complex group action involving 30,000 claimants. So, what did Master Hurst have to say about the appropriate hourly rates to allow for the law costs draftsmen who prepared the bill of costs in what must be one of the largest and most complex legal costs claims ever seen?

“The final matter raised by Mr Bacon was the rate payable to the costs draftsmen. He suggested this should be the grade D rate, and criticised the various mistakes which had been thrown up in the way in which the bill had been drawn. I have no details of the number of costs draftsmen involved, but am aware that Mr Ellis, who is a very experienced costs draftsman, has been in court throughout the hearing. I would expect Mr Ellis to be charged at the grade C rate, and for other more junior costs draftsmen to be charged at the grade D rate. This is a matter which may have to be argued further when the details of the costs draftsmen's involvement are known.”

One of the most well respected costs draftsman in the country, dealing with one of the most complex costs matters, and the provisional view was that grade C rates were appropriate with everyone else at grade D.

What a contrast with the views expressed in Cook on Costs:

“in heavy bills involving amounts considerably in excess of the fast track … the use of a Grade A or B draftsman … would be reasonable and proportionate”

The inconsistent arguments being put forward by the anti-Jackson lobby continue unabated.

Access to Justice Group co-ordinator Andrew Dismore was recently reported as saying:

“The government must think again and not give in to the special pleading of the fat cat multinational insurance companies, who are the sole beneficiaries of their plans. They will save millions of pounds at the expense of ordinary people who have been hurt on the roads or at work. The government’s plans are Draconian and will end access to justice for the less well off.”

Colum Smith, the solicitor who acted for the claimant in the recent high-profile £6m damages claim for plastic surgery injuries, was quoted in the New Law Journal as saying his firm would not have been able to act if success fees were no longer recoverable and limited to 25% of damages:

“If we lost the case, we would have lost too much money. I make a living doing high risk cases. I don’t cherry pick.”

The line of reasoning being taken here is that without recoverable success fees solicitors will be unwilling to take on more risky claims.

A crucial part of the Jackson package is the proposal to introduce qualified one-way costs shifting (QOCS). Generally, successful defendants would no longer be able to recover their costs from the unsuccessful claimant.

So what does David Hartley, Director of ATE services at Abbey Legal Protection, predict QOCS will mean? He was quoted in Costs Lawyer magazine as saying QOCS would lead to “a massive market in speculative and fraudulent claims”.

If these twin predictions are correct, post-Jackson we can expect claimant solicitors to be less willing to run genuine cases, because of the risk of losing, but more willing to take on speculative and fraudulent claims, regardless of the risk of losing.

Or perhaps not.

Which is it to be? More or less litigation?

When considering the issue of what hourly rates to allow, in the preliminary issues judgment in Motto & Ors v Trafigura Ltd & Anor [2011] EWHC 90201 (Costs) (15 February 2011), amongst the relevant factors identified by Master Hurst was:

“I have no doubt in this case that Mr Day has taken responsibility for this litigation at great personal financial risk to himself, and financial risk to his firm generally.”

I don’t understand this.

The ‘financial risk’ was the risk that the claims would fail and, as they were being run on a ‘no win, no fee’ basis, no costs would be recovered. However, that is what the success fee is designed to cover and was considered elsewhere in the judgment.

To factor this in when considering what hourly rates to allow appears to be a case of double-counting.

Mike Scutt, writing in Solicitors Journal, referred to a company called Solicitors Holistic Innovations Tactics & Endeavours Ltd.

How did he get away with that?

Lord Justice Jackson’s most recent observations include:

“Even if no success fees were payable (and I am not advocating this), solicitors would still do much PI work. There would simply be less surplus to share out amongst claims management companies, ATE insurers, trade unions etc.”

I hope he wasn’t including law costs draftsmen and costs lawyers in the “etc”.

 

Three cheers for the Access to Justice Action Group (AJAG) and the Association of Personal Injury Lawyers (APIL). Words you probably didn’t expect to hear on the Legal Costs Blog.

They have been loudly trumpeting their “independent research” into the impact of the Government’s proposals for ‘no win, no fee’ agreements. Press releases, tweets, etc.

They have been strangely quiet about one element of the research findings. Of those members of the public interviewed who had brought a claim under a ‘no win, no fee’ agreement, only 2% lost their case after court proceedings had been issued. A further 3% had been dropped on the solicitors’ advice. Of those cases where proceedings were issued, over 90% of claims were successful.

And we are seriously expected to believe that with these kind of success rates solicitors will not be willing to run these claims regardless of any changes to the ‘no win, no fee’ system.

I’ll be waving this research around at the next detailed assessment I attend with a success fee claimed.

More research like this please.

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