There is a firm of costs solicitors whose website states, as one of the reasons to instruct them to deal with costs budgeting:
“As a firm of solicitors, all of our advocates have rights of audience at CCMCs, something which costs draftsmen and costs lawyers who are not employed by solicitors do not.”
It is not entirely clear what is meant by this statement and what meaning is intended to be given to “employed by”. Is this intended to be narrowly interpreted to mean a full time employee or to have the meaning traditionally used when referring to costs draftsman having rights or audience by virtue of being treated as being temporarily employed by the solicitors instructing them? There cannot be many CCMCs where a costs draftsman/costs lawyer would be instructed by anyone other than a firm of solicitors.
In any event, the statement is inaccurate in relation to costs lawyers.
There was, indeed, a problem with the old Statement of Rights for costs lawyers. Confusingly, a Google search for “costs lawyer statement of rights” still produces a result from the Legal Services Board for the old statement which limited costs lawyers’ rights to “proceedings being conducted under parts 43-48 of the Civil Procedure Rules 1999 (“CPR”) and under part 52 of those rules” (the pre-1 April 2013 costs provisions). This did not cover the introduction of costs budgeting under CPR 3.
However, the position was updated from 26 March 2014 in the Costs Lawyers’ Code of Conduct:
“As a Costs Lawyer you are a regulated person under the LSA and are authorised to carry on the following reserved legal activities:
Provided that you are instructed to deal only with matters that relate to costs, you may conduct proceedings and represent clients in any court or tribunal, including any criminal court or courts martial, the Supreme Court or the Privy Council where:
Where proceedings relate to other matters, in addition to costs, the rights referred to above apply only to those parts of the proceedings (if any) that:
A matter ‘relates to costs’ if it relates to payments for legal representation, including payments in respect of pro bono representation under s194 of the LSA and/or to payments made for bringing or defending any proceedings, but only if and to the extent that those monies are not damages. For the avoidance of doubt, this includes:
Costs management and budgeting is therefore expressly covered. Interestingly, it does leave open an argument that a costs lawyer can only deal with the costs aspect of a CCMC rather than the case management part. Whether it would ever be sensible to entrust the case management part of a CCMC to a costs lawyers (or an employee of a costs firm) is a different matter.
Costs budgeting is currently one of the great failures of the Jackson reforms, despite the ever hopeful views expressed by some members of the judiciary. Many explanations can be given but the comments made by Mr Justice Stuart-Smith in his keynote speech at the Costs Law Reports Conference 2016 are revealing:
“the expectation of Jackson LJ and the senior judiciary was that most costs budgets would be agreed, not least because of an appreciation by the other party of the expertise that has gone into its preparation”
If this is true, it was a bizarrely optimistic and naïve view to hold.
Where to begin?
You couldn’t make it up.
It is obvious that all those involved in civil litigation need to understand the operation of the “without prejudice” rule, be they insurance claims handlers, paralegals, solicitors, costs lawyers, etc.
The recent decision of Chief Master Marsh in Ravenscroft v Canal & River Trust  EWHC 2282 (Ch) considered whether an exception to this rule existed in relation to interlocutory hearings. As part of that judgment the judge observed:
“The boundaries of the exclusionary aspect of the without prejudice rule are not entirely clear”
The boundaries of exceptions to the rule are no doubt not 100% clear but it is alarming the extent to which some lawyers appear to have failed to grasp even the most rudimentary basics of the rule.
I recently had to make an application against a well-known firm of personal injury solicitors to strike out Replies which made express reference to the existence and amount of a Part 36 offer made during negotiations over costs. By the time the matter reached court, all matters except for the costs of the application had been agreed. Costs Judge Master James dealt with the matter on paper and the short written decision covers the relevant facts:
“I have read the Application and both sides’ version of events.
The decision to refer (in the original Replies) to the amount of a Part 36 offer is an extraordinary step.
Post Halsey it is much more likely than not, that the parties will have attempted some form of ADR (whether it be by way of Part 36, Calderbank offer or otherwise).
However, it is extremely trite law that the Court may be embarrassed to hear a matter, if it is made aware of the existence and in particular of the quantum of any Part 36 offers.
In the worst case scenario, a Master reading the original Replies on the morning of the Hearing could have said ‘I must now recuse myself from this case and it will have to be adjourned until another Master can hear it. That is likely to be several months off. The party responsible for this is the Receiving Party who will therefore now have to bear the costs of this adjournment.’
When the Paying Party pointed this issue out, the Receiving Party’s response was to remove reference to ‘Part 36’ but to leave in the reference to the existence of their offer, to the sum of their offer, and to the Paying Party’s rejection of their offer. To my mind this risked the same mischief as in the foregoing paragraph and whilst it must be said that most Masters (myself included) would likely press on, they would then have regard to the Receiving Party’s extraordinary conduct when dealing with the Costs of Assessment. Since it has been resolved before that point, what is to become of those costs?
I therefore ask myself, whose fault was it that the Paying Party made the Application? The Receiving Party would have me rule that it was an attempt to undermine the Provisional Assessment procedure, but I do not agree. I think that the Paying Party was entitled to pursue the Application, having given the Receiving Party due notice that it would do so if the Replies were not revised to remove the offending reference to the offer (whether described as a Part 36 offer or not).
As such the Paying Party is entitled to its costs of the Application.”
Those hoping that the fallout from Brexit would kick any further costs reforms into the long grass are likely to be disappointed.
The government has announced:
“More needs to be done to control the costs of civil cases so they are proportionate to the case, and legal costs are more certain from the start. Building on earlier reforms, we will look at options to extend fixed recoverable costs much more widely, so the costs of going to court will be clearer and more appropriate. Our aim is that losing parties should not be hit with disproportionately high legal costs, and people will be able to make more informed decisions on whether to take or defend legal action.”
“We are keen to extend the fixed recoverable costs regime to as many civil cases as possible. The senior judiciary will be developing proposals on which we will then consult.”
I have previously commented on the issue of the timing of orders for interim costs payments.
CPR 44.2(8) reads:
“Where the court orders a party to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs, unless there is good reason not to do so.”
CPR 47.16(1) reads:
“The court may at any time after the receiving party has filed a request for a detailed assessment hearing –
(a) issue an interim costs certificate for such sum as it considers appropriate; or
(b) amend or cancel an interim certificate.”
I had always read this to mean there were two stages at which such an order could be made:
If an order for a payment on account had not been made when the costs order was being made, the next opportunity to obtain an order for an interim payment would not arise until after a request for a detailed assessment hearing had been made. This is the view shared by the authors of Cook on Costs.
This issue came up for determination in the recent case of Ashman v Thomas  EWHC 1810 (Ch) (19 July 2016).
Chancery Master Matthews had given judgment and awarded costs to the defendant. Subsequently, when trying to agree the terms of the order, the parties fell out over an attempt by the defendant to include a term for a payment on account of costs, which the claimant objected to. The matter was referred back to the Master for a decision to be made on written submissions.
The claimant argued that a payment on account should be sought at the time that the costs order is made. The alternative was that an interim costs certificate may be issued at any time after the commencement of the detailed assessment process, under CPR 44.16(1). (This is a typo in the judgment and should clearly be CPR 47.16(1)). As there had been no request for a payment on account at the time the order was made and as no detailed assessment proceedings have yet been commenced, no order should be made (ie the Cook on Costs view). (Actually, if this is what the claimant argued it was not 100% correct. An interim costs certificate can only be issued once a request for a detailed assessment has been filed; it is not sufficient that detailed assessment proceedings have been issued.)
The Master resolved the issue in the defendant’s favour on the basis:
“The substantial point, as it seems to me, is whether a request for a payment on account can only be made at the hearing itself. If so, then, once the parties come to draw up the order for the court’s approval, it is too late to argue for its inclusion.
The general rule is that an order takes effect from the moment it is made by the court, not when it is entered and sealed by the court office: see Holtby v Hodgson (1890) 24 QBD 103; CPR 40.7. But the court retains power to alter its judgment or order at any time until it is entered and perfected by sealing: Re Barrell Enterprises  1 WLR 19, CA. This power is not restricted to exceptional circumstances: Re L (Children)  1 WLR 634, Sup Ct.
There is nothing in the rules, nor any case of which I am aware, to alter the general rule in the context of payments on account of costs. Indeed, the mandatory terms of CPR rule 44.2(8) (subject to the existence of a ‘good reason’) mean that there is even more reason to exercise the power when the matter is drawn to the court’s attention than there might otherwise be. Accordingly I conclude that there is no objection in principle to considering the Defendant’s request for a payment on account of costs, and indeed good reason to do so, when this is sought after the hearing but before the order is sealed. I shall therefore do so.”
Of course, this decision rather evades the issue. The Master did not expressly decide that no general power existed to make an order under CPR 44.2(8) at any stage. Rather, he decided that he had the power to “alter” his order, prior to it being entered and sealed, to include provision for an interim payment.
Nevertheless, it is clearly implicit in his decision that this route was only open to him because the final order had not been entered and sealed. Otherwise, the defendant would have had to wait until after filing a request for a detailed assessment hearing. Usually, if no request is made when judgment is being handed down, any subsequent request is made long after the final order has been entered and sealed.
On Day One of Contract Law they teach you that if a party makes an offer (“Offer A”) and the other party rejects the offer, the rejection of the offer means Offer A is no longer open for acceptance in the future.
They also teach you that if a party makes an offer (“Offer B”) and the other party makes a counter-offer (“Offer C”), that counter-offer amounts to rejection of Offer B and Offer B therefore cannot be accepted in the future.
It is also well established that Part 36 is a self-contained code which provides expressly for the manner in which offers may be made, modified and withdrawn and that as such it displaces the ordinary rules of common law. The CPR provides that unless a Part 36 offer is expressed to be time limited, it remains open for acceptance unless written notice has been served withdrawing the offer. This means, for example, that where a party makes an offer (“Offer D”) the other party can make as many counter-offers or counter-Part 36 offers as they like but still accept Offer D at some point in the future (if it has not been expressly withdrawn by that stage).
An interesting twist on this issue come in the recent case of DB UK Bank v Jacobs Solicitors (claim no. HC2013000358) on which Andrew Hochhauser QC, sitting as a High Court judge, said there was “apparently no authority directly on the point”.
The court ruled that that a claimant’s Part 36 offer amounted to a counter-offer, meaning that an earlier common law offer by the defendants was no longer open for acceptance. In other words, where a party makes an ordinary offer (“Offer E”) and the other party makes a Part 36 offer in response (“Offer F”), the consequence is that Offer E is no longer open for acceptance.
Although this is relevant for all litigation, it is particularly important in the context of costs litigation.
PD47 para.8.3 states:
“The paying party must state in an open letter accompanying the points of dispute what sum, if any, that party offers to pay in settlement of the total costs claimed. The paying party may also make an offer under Part 36.”
It would be a mistake to assume:
I am delighted to announce that Gibbs Wyatt Stone has won the prestigious ‘Law Costs Firm of the Year’ award.
I have to confess that this did not come as a complete surprise. Readers may recall we had previously been awarded ‘Most Outstanding Law Firm of 2016, the UK’ by Wealth & Finance INTL magazine. They recently chased this up to see if we wanted to take out one of their expensive packages to promote the fact we had won this award. I responded:
I write further to your email below and have discussed this with my fellow partners.
We operate in a very niche area of law (law costs drafting) and feel that ‘Most Outstanding Law Firm of 2016, the UK’ is rather too general an award to have any marketing potential from our perspective.
I do not know whether Wealth & Finance INTL has a specific award for the category of ‘Law Costs Firm of the Year’. If such a category did exist, given our success in being awarded ‘Most Outstanding Law Firm’, I would hope your awards panel might look favourably on us being considered for the same.
If we did happen to be successful in such a category, it is likely that my fellow partners would look very favourably on taking one of your packages to publicise our success.
All credit to the efficiency of their awards panel because within a little over one hour I received this response:
“Hi Simon thanks for your email.
I have spoken to my team about this request, and I am pleased to inform you that this would be an option, our research team would be delighted to award you the title of Most Outstanding Law Firm of 2016 – Law Costs Firm of the Year’.
Do let me know you [sic] thoughts on this and if you have any queries.
I must admit to being rather overwhelmed by all this. I take no personal credit for this success but believe it is a reflection of the hard-work, talent and sheer determination of my fellow partners and colleagues at Gibbs Wyatt Stone.
If anyone else fancies a similar award, you know where to go.
When costs budgeting was first introduced there was a fair amount of uncertainty as to when the budgets should be filed and exchanged (a problem caused by the apparent conflict in wording between the rules and the contents of the directions questionnaire).
The latest version of the rules (coming into force on 6 April 2016 and applying to cases where proceedings are issued after 6 April 2016) provides:
Unless the court otherwise orders, all parties except litigants in person must file and exchange budgets—
(a) where the stated value of the claim on the claim form is less than £50,000, with their directions questionnaires; or
(b) in any other case, not later than 21 days before the first case management conference.”
It is difficult to see the logic behind the different dates for when the budgets should be filed and exchanged. To do so with the directions questionnaire, for lower value claims, is inevitably a costs front-loading step. It is likely to be a more disproportionate additional cost for these lower value claims than it would be for higher value ones. It is also more likely to be an additional wasted cost as lower value claims are, on average, more likely to settle at an early stage in proceedings and often well before a CMC (when a costs management order might actually be made).
The latter problem is compounded by the fact that the courts continue to struggle to list matters for CMCs at an early stage. The consequence of this is that by the time the matter does reach a CMC the earlier costs budgets will often be out-of-date and largely redundant (with the work therefore either being wasted or having to be repeated with up-to-date budgets).
It is unfortunate that the rules have been drafted in such a way as to generate a largely unnecessary and unhelpful front-loading of costs. Unless you are a costs lawyer or law costs draftsman I suppose.
Costs Law Reports’ latest Costs Bulletin contains some interesting comments on the new proportionality test.
Giving the background to the previous approach:
“Hitherto, there are rules and a body of case law which enable matters such as hourly rates, success fees and the indemnity principle to be predicted with a degree of certainty. In this way, the outcome of the line by line assessment can be calculated closely enough to enable decisions to be taken on Part 36 offers etc with confidence.”
I have some doubts that the position was ever quite this rosy such that a decision could be made with “confidence”. An experienced costs lawyer or law costs draftsman could certainly predict the likely outcome, within a certain range, of what would be allowed by the average judge on detailed assessment. Regrettably, not all judges behaved in a predictable way. One might be 90% confident that the hourly rates for a routine low value claim would be limited to Grade C rates, but that was of little comfort when faced with a judge who was happy allowed Grade A rates. Matters were obviously complicated by normally not knowing in advance whether a matter would be listed before an experienced judge or before a deputy district judge who possibly had no knowledge of even the basics of costs law. A practitioner who has never walked out of court shell-shocked by how generous/harsh a judge has been is almost certainly a practitioner who rarely walks into court in the first place.
It was certainly possible to recommend acceptance of a “generous” Part 36 that would give a fairly clear windfall to one’s client if accepted. Equally, it was possible to pitch an offer that was sufficiently “generous” to give excellent protection, but such offers were also likely to give the other side a windfall if accepted. The difficulty was advising on offers that placed the client at potential risk but which were anything but generous.
Commenting on the new proportionality test, the Costs Bulletin states:
“Costs lawyers are experts in costs. In the same way that they have developed expertise in working out what a bill is likely to be worth at detailed assessment, a new skill is now open to them: by how much, if at all, will the bill as assessed, be further reduced when the court stands back at the end of the detailed assessment and applies the new proportionality test? Suppose, for example, the receiving party recovers £1m in damages and is charged £250,000 by his solicitors. No issue is likely to arise about the proportionality of such costs. Contrast that with damages recovered of £250,000 and costs incurred of £250,000. Proportionality will be at the forefront of any challenge by the paying party and it will be for the skilled costs lawyer to advise by how much the reasonable and necessary costs as assessed will be cut down further when the proportionality test is applied. Not all doom and gloom by any means.”
But by what route will this new “skill” emerge?
If judges start to apply the new proportionality test in a consistent manner, the new “skill” will not be difficult to acquire and it will not be, in real terms, much of a skill. If judges routinely start to limit proportionate costs for ordinary litigation to 50% of the amount in dispute (or 75% or 100% or whatever), it will easily become predictable what will be allowed, but this will not be a skill that costs lawyers (or law costs draftsmen or costs counsel) will be able to lay any particular claim to.
It may that there will be consistent inconsistency. In other words, Costs Judge X will normally allow X% of damages, District Judge Y will normally allow Y% of damages and County Court Z will normally allow Z% of damages. Gaining the relevant knowledge of what is allowed in certain courts before certain judges is a skill of sorts – perhaps akin to knowing that certain judges always allow Grade A rates regardless of how routine the matter is and other judges never allow 100% success fees regardless of how risky a case is – although not a great reflection of the judicial system if proportionality is to be reduced to a postcode lottery and still leaves the problem that often one does not know which judge will be assessing matters (and very rarely does in provisional assessment matters) in advance of the actual day of assessment. Being able to guess 30 minutes before a hearing starts whether one is going to do well or badly is a skill of limited value.
The more likely outcome is that judicial decisions on the new proportionality test will be random and arbitrary. In such circumstances the “skilled” costs lawyer will be of no more value than the novice one.
The mysterious issue of the disappearing (according to the Association of Personal Injury Lawyers) whiplash claims merits some further analysis.
On-line information quotes the number of whiplash claims in 2010/11 as being 571,111. That year there were 790,999 overall motor claims. The number of non-whiplash claims was therefore 219,888 (790,999 less 571,111).
If (according to APIL) the total number of whiplash claims has dropped by 41% in 2015/16 it must mean whiplash claims were down to, about, 336,955 (59% of 571,111). The overall number of motor claims that year was 770,791. That would leave a balance of (about) 433,846 (770,791 less 336,955) non-whiplash claims.
That is almost a doubling (from 219,888 to 433,846) of non-whiplash injuries during a period where overall claim numbers were basically unchanged.
That is bunkum. Nothing could explain such a dramatic change in the nature of injuries suffered in RTAs during such a relatively brief period of time (with no significant changes in car design, seatbelt use, road congestion, etc.)
(Government figures give the number of pedal cyclist casualties reported to the police (not claims) as a result of road accidents in 2014 as 21,287. Even allowing for a very major increase in the number of cyclists since 2010/11, with a corresponding increase in casualties, and allowing for the fact the number of claims may be higher than the number of accidents reported to the police, an increase in cycling injuries does not seem to be a remotely plausible explanation for the massive increase in non-whiplash claims.)
So, where have the whiplash claims gone and what type of injuries have massively increased at exactly the same time? If this is a genuine change, personal injury lawyers must have noticed something significant happening over the past few years. But what?
In the absence of anything more plausible being advanced, I am sticking to my theory that there has been no significant reduction in whiplash injuries but simply the result of some (probably dubious) reclassification of injuries suffered.