Breakdown of bill by phase

The requirement from 1 October 2015 to serve a breakdown of the costs claimed for each phase of the proceedings together with the Bill of Costs, where a costs management order has been made, is an odd one.

This is clearly intended to be an interim measure until the new Bill of Costs format is introduced where the Bill itself must be drafted by phases.

Firstly, to prepare a breakdown by phase requires either the fee earner to have accurately recorded all work by phase (highly unlikely), as the case progressed, or the costs draftsman preparing the Bill to allocate each routine communication and unit of work to the appropriate phase. Once this work has been undertaken, it is surely almost as simple to simply draft the Bill itself by phase. Why force the receiving party to do all the hard work and then not require the small additional step to be undertaken to complete the process?

Secondly, is there seriously anyone on the Rules Committee naïve enough to think that were a party discovers they are over on some phases but under on others that they will not be tempted to shift some of the work over into other phases of the breakdown in the knowledge it will be an extremely difficult task for the paying party to cross-check the accuracy against the non-phased Bill?

Thirdly, what is a judge on assessment meant to do with a breakdown showing a party has gone over for some phases but where the Bill itself is not drafted by phase? Presumably they will go through the Bill in the normal way applying reductions in the ordinary manner, but then what? How are they to tell whether they have now reduced some phases below that approved by a costs management order (which normally should not happen) or whether they are still over on others and further reductions are required? Are the advocates at the assessment meant to adjourn and work out which reductions have been made to each phase before going back before the judge to consider whether he needs to increase or decrease further? Has the slightest thought been given as to how long this would take (not to mention the problems trying to apportion routine communications to any particular phase)?

I’m becoming increasingly convinced that implementation of the Jackson reforms is not being done with any intention this should work but is a deliberate attempt to increase costs and confusion to the extent that everyone throws their hands in the air in horror and begs for fixed fees across the board.

New Precedent Q

CPR 47.6 is amended from 1 October 2015 such that the documents to be served when commencing detailed assessment will now include:

“if a costs management order has been made, a breakdown of the costs claimed for each phase of the proceedings”

(The new Model Precedent Q can be found on this link showing the format of the breakdown.)

The fact the requirement to serve the breakdown only arises when a costs management order has been made is, perhaps, odd. I wonder if the rule committee overlooked PD 44 para.3.4:

“On an assessment of the costs of a party, the court … may have regard to any other budget previously filed by that party, or by any other party in the same proceedings. Such other budgets may be taken into account when assessing the reasonableness and proportionality of any costs claimed.”

Given the accuracy of budgets is meant to be considered by phase, there equally seems to be a need for a breakdown whenever a budget has been served, regardless of whether a costs management order has been made.

Oooo la la!

Readers are probably aware of the male solicitor who, in response to an invitation to connect via LinkedIn to a female barrister, commented on the “stunning picture” on her profile. In turn she publically named and shamed him for his “unacceptable and misogynistic behaviour”.

Her LinkedIn profile has since been updated to include the following:

“I am on linked-in for business purposes not to be approached about my physical appearance. The eroticisation of women’s physical appearance is a way of exercising power over women. It silences women’s professional attributes as their physical appearance becomes the subject.”

The press have been having much fun with the story, not least when it was reported she herself had allegedly previously posted comments on social media describing photographs of men and women as being “sexy”, “stunning”, “Hot stuff!” and “oooo lalala!”.

Now, readers of this blog are old enough to make up their own minds as to the appropriateness of his original comments, her response, or whether there is any justification in the implication of hypocrisy on her part, without me needing to add my two cents worth.

Nevertheless, there are a couple of general points that arise.

There is no requirement to add a photograph to a LinkedIn profile. If a conscious decision is made to add a photograph, it cannot come as a complete shock if this prompts comment at some stage. (I once met a female costs lawyer at an Association of Costs Lawyers Annual Conference who commented I was much better looking in my online photograph than in real life.)

It can’t really come as a shock to discover that some people are looking at the profiles that appear on LinkedIn with more interest in the pictures that in the professional qualifications.

When clicking on a LinkedIn profile, the right of the page displays the profiles of “People Also Viewed”. If you are viewing the profile of a young female with accompanying attractive photograph, the other suggested profiles almost invariably suggest other profiles featuring photographs of other attractive young women. Coincidence or LinkedIn’s algorithms recognising people’s searching habits?

The other aspect of this story that interested me was how the initial incident ever arose.

The press have referred to the female barrister as a “human rights barrister”. In her LinkedIn profile she describes herself as:

“I am working towards a doctorate in Law and Sociology at the University of Cambridge researching the legal and policy approaches designed to combat female genital mutilation in England and Wales. Prior to commencing a PhD, I practised as a barrister in family law.

As an associate tenant at the Chambers of Michael Mansfield Q.C. I have a strong background in working with vulnerable women seeking legal support having undertaken pro bono work in the Middle East, Pakistan, and the Democratic Republic of Congo where I helped establish the country’s first free legal advice centre.

I write for a range of publications including the Independent, and the Guardian on civil liberties violations, and often speak at public events.”

The solicitor she approached to link to her is Head of European Intellectual Property at a City firm.

Perhaps she thought her background in family law and female genital mutilation would be the perfect skillset that a City IP solicitor would be looking for when instructing a barrister. Perhaps she is looking to move into a totally different area of law and thought that linking up with random strangers via LinkedIn would be the best way to do this.

I note her profile shows her as having over 500 connections. Having received no end of invitations via LinkedIn to connect with those I neither know nor work in the same area of law as, I never cease to me amazed by those who seem to treat LinkedIn as if it as a popularity contest with the aim of amassing the highest number of “connections” regardless of any genuine common professional link.

Proportionality and additional liabilities

An interesting aside from Senior Costs Judge Master Gordon-Saker in BP v Cardiff & Vale University Local Health Board [2015] EWHC B13 when considering a case with a pre-1st April 2013 CFA where the new proportionality test applied to work done after 1st April 2013:

“On behalf of the Defendant Mr Kiernan told me that it would not be fair to include any additional liabilities when considering the proportionality of the costs allowed for work done after 1st April 2013. He relied only on the figure of £138,202.97. As the point was not argued, I reach no conclusion as to whether when considering under the new rule the proportionality of costs incurred after 1st April 2013 additional liabilities should be taken into account.”

This suggests the point is open for argument.

The rules certainly do not appear to expressly address this point.

CPR 48.1(1) states:

“The provisions of CPR Parts 43 to 48 relating to funding arrangements, and the attendant provisions of the Costs Practice Direction, will apply in relation to a pre-commencement funding arrangement as they were in force immediately before 1 April 2013, with such modifications (if any) as may be made by a practice direction on or after that date.”

The old Costs Practice Direction at 11.5 read:

“In deciding whether the costs claimed are reasonable and (on a standard basis assessment) proportionate, the court will consider the amount of any additional liability separately from the base costs.”

If this survives, so far as pre-1st April 2013 CFA’s are concerned, it would seem to suggest under the new proportionality rule additional liabilities should not be taken into account. Master Gordon-Saker’s comments perhaps imply the matter is not quite so straightforward. Or, perhaps, he takes the judicial line that there is nothing to be gained from expressing any opinion where it is not entirely necessary.

Costs management

From the Association of Costs Lawyers’ Judicial Round Table on costs management earlier this year:

Neil Rose: Has the SCCO seen any cases come through yet?

SCJ Gordon-Saker: Not one, as far as I am aware…we are still in the dark as to what will happen.

Neil Rose: Any ideas?

SCJ Gordon-Saker: I anticipate lots of histrionics.

2015 Award for Most Bizarre Argument Advanced in Replies

2015 Award for Most Bizarre Argument Advanced in Replies goes to the following included in reply arguing why costs were not disproportionate in matter which settled pre-trial for £2,500:

“At the start of the claim, the Claimant made a Part 36 offer to settle the matter in the sum of £10,000. Relative to the costs that have since been incurred by both parties, had the Defendant’s accepted this sum or a lesser but similar figure the total figure for costs and damages would have been substantially lower than have ultimately proven to be.”

Dividing bills of costs

The Senior Costs Judge Master Gordon-Saker has given definitive guidance as to how bills should be divided in the case of BP v Cardiff & Vale University Local Health Board [2015] EWHC B13:

  • Divided between periods where different proportionality test applies:

“In any case in which both approaches need to be taken it will be necessary to identify the work which falls before and after that date and to identify the sums claimed for the work done before and after that date. In my judgment where the case commenced on or after 1 April 2013, the bill covers costs for work done both before and after that date and the costs are to be assessed on the standard basis it must be both convenient and necessary for the bill to be divided into parts so as to distinguish between costs claimed for work done before 1 April 2013 and costs claimed for work done on or after 1 April 2013.”

  •  Divided by phase where costs management order:

“In order for the paying party and the court to know which items of work are claimed in relation to each phase the bill would need to be drawn in parts which reflect the phases. Although multi-part bills tend to obscure the overall picture, it seems to me that (unless a sensible alternative can be devised) in a case in which a budget has been approved or agreed and the costs are to be assessed on the standard basis it will be both necessary and convenient to draw the bill in parts which correspond with the phases of the budget.”

  •  Divided between work done before and after a costs management order is made:

“Within each part it will also be necessary to distinguish between the costs incurred before and after the budget was agreed or approved. This could be done without further sub-division by use of italics, bold, superscript or some other formatting device.”

  •  Divided to show work relating to costs budgeting work:

“Where a costs management order has been made and the receiving party’s budget has been agreed by the paying party or approved by the court it will be both necessary and convenient that the bill be divided so as to identify the costs of initially completing Precedent H and the other costs of the budgeting and costs management process, unless those costs can be clearly identified in some other way.

I use the phrase “definitive guidance” advisedly. There is absolutely no prospect of a higher court overturning the guidance given by the Senior Costs Judge on matters of costs practicalities. The judgment also gives a costs warning where bills are not clearly divided:

“In the present case it was necessary for the parties to spend time in the hearing to identify the items of work which related to the budgeting and costs management process. Had the overall result been different the [receiving party] may have been expected to pay the costs of that in any event.”

Cost of drafting Precedent H

PD 3E para.7.2 is a deceptively simple provision:

“Save in exceptional circumstances-

(a) the recoverable costs of initially completing Precedent H shall not exceed the higher of £1,000 or 1% of the approved or agreed budget”

Without any further qualification, the £1,000 figure must be taken to be inclusive of any success fee or VAT claimed. (Readers will recall a similar issue arose with the first version of the rules concerning the £1,500 provisional assessment cap. It required an amendment to allow for VAT in addition but remains inclusive of any success fee.) This means that for a costs budget of up to £100,000, the base costs recoverable (assuming a 100% success fee and VAT are claimed) would be limited to £416.67 for preparing Precedent H.

The 1% figure is more problematic.

Again, without qualification, this must be taken to include VAT and any success fee. However, Precedent H expressly excludes VAT and success fee. This would appear to mean, for example, that for an approved or agreed budget totalling £150,000 the recoverable costs are limited to £1,500 fully inclusive, even if with success fee and VAT the recoverable costs at the end of the case (once VAT and success fee is allowed) might be well in excess of £300,000.

The problems do not stop there. What is the total of the approved or agreed budget?

As explained in Cook on Costs 2015:

“There appears to be some confusion as to what constitutes the ‘approved budget’ for the purposes of the percentage calculation. As the court may only budget costs to be incurred, it seems clear that the percentage is only of the sum approved by the court/agreed by the parties as the ‘to be incurred’ costs within those phases budgeted. This view is supported by the fact that CPR PD 3E, para 7 refers back to CPR 3.15. CPR 3.15(1) makes it clear that a costs management order may only be made in respect of costs to be incurred and CPR 3.15(2) makes it clear that budget for these purposes relates to the agreed or court approved figure after revision by the court. As the court cannot revise ‘incurred’ costs’, then the agreed or approved budget seems to be “only the figures included in any costs management order.”

So, for example, a budget is prepared totalling £200,000 (excluding VAT and success fee). Of this, £50,000 represents costs already incurred and £150,000 costs to be incurred. If the budget is approved/agreed in full, the 1% is calculated on the £150,000. This equates to base costs recoverable (assuming a 100% success fee and VAT are claimed) limited to £625. All the work undertaken calculating the incurred costs is irrecoverable.

Since writing the above post, but before posting, the Senior Costs Judge Master Gordon-Saker handed down judgment in BP v Cardiff & Vale University Local Health Board [2015] EWHC B13. In relation to the above issue, he stated:

“In my view the caps imposed by paragraph 7.2 of Practice Direction 3E include additional liabilities but do not include value added tax. In practice the only additional liability that will be relevant is a success fee.

It seems to me that value added tax also falls within the expression ‘recoverable costs’. As between the receiving party and its solicitor value added tax is tax for which the solicitor must account. As between the paying party and the receiving party it is not tax but a sum recoverable by the receiving party under the indemnity provided by the costs order (i.e. costs).

On that basis the capped ‘recoverable costs’ would include both success fees and value added tax. However it would seem highly unlikely that the intention of the Civil Procedure Rule Committee was not to follow the only other example where a cap is imposed: CPR 47.15(5). The cap on the costs of provisional assessment is £1,500, including additional liabilities, but excluding value added tax and any court fee.”

Although Master Gordon-Saker may well be correct as to what the intention of the Rules Committee would have been if they had given any thought to the issue, the fact remains that the wording of the rules is silent as to VAT being payable in addition and has not, yet, being amended to mirror the wording of the rules concerning the provisional assessment costs cap.

Master Gordon-Saker does share my views that VAT is an item of costs (thus making the £75,000 provisional assessment cap inclusive of any VAT).

Fixed costs working party

The Association of Costs Lawyers is inviting members to apply to join a Fixed Recoverable Costs Working Party to consider the potential extension of the fixed recoverable costs regime and draft a consultation paper.

What are the odds the response to any consultation paper is overwhelmingly that the extension of fixed fees is a “bad thing”?