Email received asking me to complete online survey. Among the questions asked:
“Do you currently have access to the internet, email, own computer? Select all that apply.
I wonder how many completing this answered “None”.
Lord Justice Jackson’s provisional view is that if there is too be an extension of fixed recoverable costs, it should, at least initially, be introduced for all claims up to £250,000:
“The first question is whether we should be fixing costs for all civil cases (like Germany and New Zealand) or just for the fast track and the lower reaches of the multi-track. This is a policy decision for others. I would favour the latter course (as recommended in my Final Report), but I acknowledge that some favour the former course. There are two particular reasons why I favour adopting the latter course: (i) Switching to a totally fixed costs regime for all claims, however large, would be too great a change for the profession to accept, certainly in the short term. The justice system only functions because of the high level of support which the profession provides.”
It is difficult to reconcile this view with two of the key justifications for fixed fees, namely predictability and an end to the need to expend time and trouble time recording all work.
Many claims are pleaded as being worth in excess of £250,000 but subsequently settle, for a variety of reasons, for a fraction of this amount. Where is the benefit to claimants or defendants of knowing that the costs might be fixed if the claim settles for £x but will be entirely at large if settled for £y?
Secondly, if the question of whether costs are fixed or not fixed is dependent on the actual future, and unknowable, settlement value, parties will have to continue to painstaking record all time to allow for the possibility that the costs will not be fixed, notwithstanding that this work will often prove to be wasted when the matter settles for under £250,000 (or whatever figure is used).
I am grateful to Kerry Underwood’s always excellent blog for bringing to my attention the case of Webb Resolutions Ltd v Countrywide Surveyors Ltd  Ch Div. (A fuller case summary can be found on RPC’s website.)
The Claimant notified the Defendant of a potential claim under the Pre-Action Protocol for Professional Negligence. The claim did not settle and proceedings were issued but the claim was abandoned before service.
Was the Defendant entitled to costs? Yes, ruled the Deputy High Court Master and those costs could potentially include all of the pre-proceedings costs that followed the direct consequence of the Pre-Action Letter of Claim.
I am not sure how this decision squares with that of case of Citation plc v Ellis Whittam Ltd  EWHC 764 (QB) where Tugendhat J ordered the Claimant to only pay the Defendant’s costs from the date of service of the claim form:
“As to the costs up to the service of the claim form, I make no order. If the Claimant had not commenced the proceedings (and I have held that it ought not to have commenced the proceedings) then the Defendant could not have sought an order for its costs for that period to be paid by the Claimant. The fact that the Claimant did commence proceedings in this case ought not to lead to the result that it becomes liable to pay to the Defendant costs which it would not have been liable to pay if it had not commenced proceedings.”
The Citation case did always appear to be something of a rogue decision. Nevertheless, two issues are highlighted by these decisions (and see McGlinn v Waltham Contractors Ltd  EWHC 1419 (TCC) for further confusion):
I was absolutely gutted to miss last week’s Association of Costs Lawyers’ Annual Conference. (No, actually, I wasn’t busy preparing for a Eurovision themed party, but recovering from surgery.)
I will now have to wait another year before having a similar chance engage in such typically scintillating conversation and the exchange of hilarious costs law related anecdotes.
If I didn’t have bad luck I’d have no luck at all.
The last increase in the VAT rate occurred on 4 January 2011. It is therefore surprising, to say the least, that some receiving parties appear to be still ignorant of the rules relating to work undertaken when the VAT rate was lower (15% or 17.5%). (Of course, it is perfectly possible that this is simply a wheeze to try to recover VAT at a higher rate and then pocket the difference between that actually charged.)
I’m not sure if Lord Justice Jackson has recently started taking backhanders from the Association of Costs Lawyers but, if so, I’d be happy to start contributing to the payments. How else to explain his proposals for the extension of fixed fees?
Payments are to be linked to one of ten different phases with endless scope for arguing it was premature to undertake a particular phase (eg Witness Statements), full payment for each phase is subject to it being “completed” (what does “completed” mean?), or 50% payment if a phase has been “substantially started” (what does this mean?). It would not be difficult for a costs firm to set up a business model offering to maximise solicitors’ recovery based on these proposals and charging on a contingency fee basis.
The real problem with these proposals, I would suggest, it not a practical one but, rather at a more fundamental level. (And I do not simply mean whether it is realistic or fair to try to have fixed fees at all.)
There are two basic approaches to recovery of inter partes costs. The first is to have a fixed fee system where the fees are fixed by reference to the nature of the litigation, or the complexity of the case, or the value of the claim, or a combination of these elements. Under this system, the actual work undertaken is irrelevant.
The second approach is to have a system which attempts to set the level of fees payable based on the amount of work actually done. This is the existing (if imperfect) hourly rate system we currently have (for those cases not already subject to fixed fees). The more work (reasonably) undertaken, the greater the payment.
Jackson LJ’s proposals run the danger of conflating the two different systems.
If we are to have fixed fees, why should it matter whether a solicitor has, for example, completed work in relation to witness statements, or substantially started work in relation to witness statement, or, indeed, done any work concerning witness statements? What does a fixed fee system partially based on the work actually done add to the supposed benefits (certainty, end to costs budgeting, end to costs disputes) of fixed costs generally?
There are, of course, potential advantages and disadvantages to having staged fixed fees.
On the one hand, if fees are not staged there is an incentive for solicitors to settle the claim as quickly as possible to maximise their profits. Speedy settlement is a good thing for clients. On the other hand, if they are not staged there is a danger claimant solicitors will under-settle claims in their haste to conclude matters. That is a bad thing for claimants.
If fixed fees are not staged there may be a risk defendants will fight cases for longer, or to trial, knowing there is no additional cost consequence (other than increased own costs). Conversely, where fixed fees are staged, there will be a clear incentive for solicitors to press on to the next stage of the litigation and secure the further payment. (How many thousands of hours of judicial time have been wasted hearing arguments over “premature issue” in predictable fee cases because of the incentive in tipping the case into litigation and therefore potentially recovering greater costs?)
It is far from self-evident that the latest proposals have been put forward having properly considered the advantages or disadvantages of linking the fixed fees to the actual work undertaken.
Lord Justice Jackson’s suggested rules and grid for introducing fixed fees for all claims with a value of up to £250,000 (which he suggested could be accomplished this year if the political will is there) rather has the appearance of being put out there, not necessarily with the intention it will be formally adopted in its current form but, rather, out of a sense of frustration at the lack of progress to date and is designed simply to start discussion on the issue.
It may, perhaps, therefore be unfair to be overly critical of the proposals in their current form. Nevertheless, let us take them at face value as they currently stand.
There appear to be two obvious problems.
The first relates to the decision that the grid of fixed fees should follow the ten stages set in Precedent H for costs budgeting. This is on the basis that: “Practitioners are now familiar with this structure and reasonably comfortable with it. Although ‘boundary disputes’ are inevitable in any structure, they will be reduced if we stick to the now established division of tasks”.
The Guidance Notes for preparing costs budgets state that the Pre-action phase should not include any incurred work relating to other phases of the budget. For example, if work is done in relation to witness statements pre-proceedings, that should go in the Witness Statements phase under “Incurred” costs, not in the Pre-Action phase. This is not an issue with costs budgeting as recording work under any particular phase does not trigger any payment. However, how does this work with the Jackson grid? In any case that settles pre-action in a claimant’s favour there will have been some negotiations, even if only a single offer and acceptance. Does this therefore trigger an entitlement to the whole Negotiations/ADR fixed fee in addition to the Pre-action fee? If so, why bother with a separate phase for Negotiations/ADR if it will always be triggered? Similar issues apply to phases such as Expert Reports or Witness Statements where some work may have been done pre-action.
The second problem, which does not appear to solve the first, is the proposed rule that: “The fixed cost is payable only if a work stage is completed. 50% of the fixed cost is payable if proceedings have been issued and the work stage has been substantially started”. What does this mean in real terms? If a case settles pre-action based on acceptance of an offer, it cannot be argued that the Negotiations/ADR stage has not been “completed”. However, some might think it strange that the same fee will be payable for a case that settles based on acceptance of a single offer pre-action and for a case that settles after proceedings have been issued, with years’ worth of negotiations, multiple JSMs and a formal mediation (even allowing for the fact that any system of fixed fees operates on a swings and roundabouts basis).
What, for example, does “completed” mean in the context of the Trial Preparation phase? If a party prepares trial bundles, briefs Counsel and summons witnesses but the case settles the day before the trial bundles were due to be delivered to Court, have they “completed” the phase. On one analysis, clearly not. Does this trigger only 50%? For claims in Band 4, this would reduce the fee from £7,000 to £3,750 simply because of one trivial step. However, once you start to introduce discretion into the process, the scope for satellite litigation spirals.
Again, what does it mean to complete the Expert Reports phase? If a claimant obtains one expert report and the case settles thereafter, it is difficult to see how this does not amount to completion of the phase. All work in relation to this phase necessary to conclude the claim has been completed. On the other hand, this is a world away from a case where both sides obtain multiple expert reports, there are joint reports, multiple conferences with experts and the experts attend trial. Same fee for both situations? Same fee for defendant if only the claimant has obtained a report? If not, where is the line drawn?
I rather fear the current proposals unnecessarily complicate matters. (Much the same mistake as was made with costs budgeting.)
Last Monday I attended a detailed assessment hearing concerning a bill totalling £93,000. The last offer made by the paying party, based on my advice, was for £27,500. The bill was assessed at £69,000. This proves what a terrible costs lawyer I am and how wholly unrealistic the offers are I put forward.
My opponent was junior costs counsel. This case also proves it is a mug’s game to instruct a costs lawyer to undertake advocacy when much better results would have been secured if my client had instructed costs counsel instead of me.
On Friday I attended another detailed assessment hearing concerning a bill totalling £383,000. The last offer made by the paying party, based on my advice, was for £175,000. The bill was assessed at £155,000. This proves what a brilliant costs lawyer I am, if, perhaps, rather overly cautious, and thus overly generous, when formulating offers.
My opponent was a top costs QC whose brief fee was over six time what I charged my client. This case also proves that my advocacy skills are up there with the top QCs and that instructing specialist costs counsel, rather than a costs lawyer, is a grotesque waste of money.
Monday’s case was before a Deputy District Judge whereas Friday’s case was before a Regional Costs Judge, which may or may not prove anything.
What both cases do prove is the spectacular unpredictability of the assessment process and the difficultly in trying to advise a client.
Costs Lawyer magazine recently published the predictions for 2016 of the great and the good in the profession. They also asked me. This was my contribution, written before Lord Justice Jackson’s latest speech:
“When I was asked this question last year, my prediction was that 2015 would be the year guidance would be given by the Court of Appeal on the new proportionality test. However, at the time of writing, we still have nothing from the High Court or above as to how proportionality is to be applied as part of the detailed assessment process. I was clearly wrong in my timings and can only hope we have something in 2016. I also repeat my previous prediction that what will ultimately emerge will be a fiasco and nothing close to what Lord Justice Jackson envisaged.
I also predicted that there would be calls for a massive extension of fixed fees as a consequence of the mess being made of Jackson implementation. Such calls have indeed been made (with proposals for fixed fees in clinical negligence cases and noise induced hearing loss cases amongst other things). Expect much more of the same in 2016.
This will be the year where the judiciary finally properly grasps the fundamentals of costs budgeting with sensible and consistent decisions being made at all levels. Resistance to costs budgeting will be overcome and all legal practitioners will acknowledge budgeting to be a useful tool to control disproportionate costs. Possibly…”
In Mansion Estates Ltd -v- Hayre & Co (A Firm)  EWHC 96 (Ch) His Honour Judge Saffman commented:
“in my view it would be wrong to assume that it is inherently more improbable that a professional person will be dishonest than anyone else. If ever such a view validly had traction, I do not think it can do so in the modern world.”
Although not a decision relating to costs, this must have equal applicability to the signature of accuracy to a bill of costs. There may once have been a stage when “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” (Bailey v IBC Vehicles Ltd  EWCA Civ 566) but the world has now moved on from such innocent days.