Litigation Futures features a guest post from Deborah Evans, chief executive of the Association of Personal Injury Lawyers, titled “Can we trust insurers to behave?”. In the context of rising insurance premiums, she called for “a robust examination of the facts” and for insurers to “stop making excuses and sort yourselves out”.
The timing of this post was unfortunate as Litigation Futures’ sister website Legal Futures carries a report this week headed: “Bolton law firm repays insurer £100,000 for ‘systematically inflating’ costs”.
Claimant law firm Asons has apparently agreed to repay more than £100,000 to AXA after admitting to falsely and systematically inflating its legal costs, according to the insurer.
The dispute involved 65 personal injury cases, settled between September 2013 and December 2014, where “Asons overstated the qualifications and experience of its legal staff to falsely inflate the bills sent to AXA”.
In a statement, AXA said: “Asons admitted that they were systematically attempting to present false and misleading information on an organised basis to exaggerate their claim for costs, but Asons denied acting fraudulently”.
AXA claimed the issue came to light following a case in Manchester County Court, where Asons claimed the fee earner working on the case had more than six years of litigation experience, when actually they had less than two. Asons claimed this was an administrative error but the court sanctioned the firm for misconduct.
It may be that AXA were specifically targeted or that, by coincidence, the only claims Asons had during this period were cases where AXA were the insurers. This seems unlikely. A more likely scenario is that, to whatever extent this “exaggerating” of costs was being undertaken, it was across the board against all insurers/Defendants. The report notes Asons agreed to pay AXA more than £40,000 in legal costs as well as nearly £70,000 in damages and interest. If 10% (for example) of costs claims during this period were against AXA, it would suggest potential overbilling totalling £700,000 by one firm during little over a year.
The report does not record to what extent other insurers have been repaid any “overpayments”.
In a statement, Asons said: “We take matters like this very seriously. Following a complaint by AXA, an internal investigation was immediately undertaken. We reported the matter to our regulator and any overpayments were returned. New procedures were instigated and we are satisfied that there has been no recurrence of the historical issues raised by AXA.”
An appropriate procedure might be to require any bills or statements of costs to be signed off with a statement of truth or certificate of accuracy.
Given this problem came to light following a case going to court and where the court appears to have made an adverse finding as to conduct, to have got that far would have required either a signed Statement of Costs or certified and signed Bill of Costs. What other “procedures” can be put in place if fee earners are prepared to certify inaccurate claims?
But at least the judiciary can happily continue with the fiction of Bailey v IBC Vehicles Ltd  3 All ER 570 CA as though this kind of thing never happens and APIL can continue to blame insurers for any increase in insurance premiums.
You couldn’t make it up.
“The proportionate amount of costs must inevitably be smaller for a case which concludes early than one which reaches a final hearing.”
My criticism was that it ran the danger of confusing what work was reasonable and necessary (the old proportionality test) with what total costs were proportionate. Inevitably, a matter that proceeds to trial will involve additional costs compared to one that does not, but that is simply part of the first stage of the assessment process.
At the recent Solicitors Costs 2017 conference Master Rowley explained the reasoning behind his decision is that, under the new regime, costs budgets are based on phases. On assessment, the more phases that have been completed, the greater will be the recoverable costs. Costs budgets are, of course, meant to produce a proportionate total. Although the claim in May does not appear to have been costs managed, Master Rowley’s reasoning is that given the approach to costs management, it must follow that proportionate costs on detailed assessment will be lower if a matter settles early (with less phases completed).
Given the existence of costs management by phases, the logic of this is difficult to argue with.
Nevertheless, if is still noteworthy that CPR 44.3(5) does not list the amount of work undertaken or the stage at which the matter settled as being relevant factors when considering whether costs are proportionate.
Further, in May the initially assessed costs of £99,655.74 were reduced to £35,000 plus VAT to reflect proportionality. This was as against agreed damages of £25,000. This, of course, begs the question as to what would have been considered proportionate if the matter had proceeded to a full trial. Sadly, Master Rowley did not share his thoughts on this.
Online job advertisement I came across over the weekend:
“Immigration/ Asylum Caseworkers / Paralegal / Family Solicitors
XXX & XXX LAW FIRM – London SW19
Our firm have opportunities ambitious Caseworkers/paralegal with experience in immigration/asylum law have a genuine interest passion immigration. The ideal candidate will have excellent drafting and communication skills; have the able to work invidiously and as a team player, have an ability to handle pressure and tight deadlines and provide excellent client care and satisfaction.”
Yes, we can all agree on the importance of excellent drafting and communications skills.
For cases where proceedings are issued on or after 6 April 2016 and cost budgets have been filed, parties must file an “agreed budget discussion report” no later than 7 days before the first case management conference (CPR 3.13(2)).
The budget discussion report must set out (PD 3E para.6A):
(a) those figures which are agreed for each phase;
(b) those figures which are not agreed for each phase; and
(c) a brief summary of the grounds of dispute.
The parties are encouraged to use the Precedent R Budget Discussion Report.
Precedent R leaves something to be desired.
Two of the columns are headed, respectively, “Claimed” and “Offered”.
The choice of the word “Claimed” is somewhat odd as nothing can be claimed in a budget in respect of incurred costs. Incurred costs are there for reference purposes only because a court cannot approve costs incurred before the date of the budget (PD 3E para.7.4). Future estimated costs are no more than that: an estimate. There is no “claim” for those costs. At best, the future estimated costs are the amounts a party is “claiming” should be allowed in a costs management order. Perhaps I am being overly picky.
A weightier issue is the absence (so far as I can see) of any guidance as to what figure is meant to be included in either of the two columns. Given a court cannot approve incurred costs, should the “Claimed” column not be limited to estimated future costs only? As a court can only approve future costs, surely it is only in respect of those costs that an opponent can make an “offer” as part of the budget discussions. If the “Claimed” and “Offered” columns included both incurred and estimated costs, a court would have no way of knowing to what extent an offer correlated to what the court could approve even if it accepted the “offered” amount as being appropriate. For example, if the Witness Statements phase of the budget includes £1,000 for incurred costs and £1,000 for estimated costs that gives a total of £2,000 for the phase. If Precedent R is meant to show the total (here £2,000) and the opponent “offers” £1,500, how much of that £1,500 relates to incurred costs (that cannot be approved) or future estimated costs that can be approved?
Precedent R is not mandatory and so it is probably worth adapting to make expressly clear it only covers future estimated costs, even if the total costs for each phase will need to be referred to at any costs management hearing.
I previously commended on the fact the law has traditionally avoided applying hindsight when assessing the reasonableness of legal costs that have been incurred.
This approach was confirmed when applying the old proportionality test in Lownds v Home Office  EWCA Civ 365:
“the proportionality of the costs incurred by the claimant should be determined having regard to the sum that it was reasonable for him to believe that he might recover at the time he made his claim”
I also commented on the problems this creates when trying to apply this in practice.
However, has this basic principle survived recent reforms?
CPR 44.3(5)(a) certainly provides that “costs incurred are proportionate if they bear a reasonable relationship to the sums in issue in the proceedings”, although that simply begs the question as to what sums really were in issue.
I would suggest that the traditional “rule” against applying hindsight may no longer apply.
Certainly, in the area of personal injury claims, the majority of matters are now subject to one form or another of fixed fees. Generally, the greater the level of damages recovered, the higher the award of fixed costs to a successful claimant. This is intended, on a swings-and-roundabouts basis, to reflect the fact that the higher the level of damages recovered the more complex the matter was likely to have been and the more work that would have been reasonably necessary.
However, the crucial point to recognise is that claimants’ costs are calculated by reference to the damages actually recovered, not the amount claimed or the amount it may have been reasonable to expect to recover.
If costs in the majority of cases are therefore now expressly subject to hindsight, by reference to the damages recovered, on what logical basis should those cases that fall outside fixed costs be subject to a fundamentally different test? Lord Justice Jackson is now embarking of a massive further extension of fixed fees. Again, initial suggestions are that these will based (at least in broad bands) on greater damages recovery meaning greater costs recovery).
It would be very odd to have two different general principles (absolute hindsight v no hindsight) operating at the same time in civil claims.
It would be nice to think the Court of Appeal will expressly address this issue when they consider proportionality in BNM v MGN Limited, but I won’t hold my breath.
My annual Costs Lawyer Practising Application form needed to be completed before the end of 2016.
As usual, this contained a section asking about the source of instructions during the previous year (solicitor, non-solicitor, legal aid, non-legal aid, etc). However, this year, for the first time, rather than ask for the percentage of cases falling into each category, it asked for the actual number of instructions from solicitors and non-solicitors. This is no doubt as a result of the expectation of the Legal Services Board that the Costs Lawyer Standards Board better understand the nature of the work being undertaken by Costs Lawyers.
The odd thing about the application form was the way the question was worded asking for “the number of instructions you (not your firm) received from a Solicitor” and “Non-Solicitor”.
Like most costs firm, I suspect, the majority of instructions received by my firm are given to the firm rather than to any named fee earner. It is normally a question of internal case loads/convenience as to which fee earner then deals with the matter. Less often a new case will be marked for the attention of a particular fee earner but, again, may be allocated to another fee earner. Only occasionally is a new instruction expressly addressed to an individual (and, even then, will sometimes need to be reallocated, with the client’s consent, depending on existing commitments).
Given the question expressly excludes instructions received by the firm, the actual number for most Costs Lawyers (sole practitioners aside), is likely to be very small and largely meaningless.
It is perfectly possible that I have simply misunderstood what was wanted and the question was actually aimed at the number of cases where work was undertaken. However, if so, I suspect I was not alone in reading this differently.
Even if it was clear as to what was being asked, I am not sure how meaningful it is to know the number of cases where instructions are received and/or cases worked on. At least in the past, some Costs Lawyers dealing with volume, low value personal injury work might handle 100 new cases each month. In contrast, a Costs Lawyer who exclusively drafts bills in group litigation might deal with an average of less than one new matter each month. Equally, the volume of cases an in-house Costs Lawyer working in a busy legal aid practice will handle will be entirely different to a Costs Lawyer working for a City firm dealing with heavy commercial litigation. The number of “instructions” a Costs Lawyer receives may increase or decrease simply as a result of a shift in the type of work being undertaken. The number of actual cases is meaningless without any context.
Re-reading the form again, an earlier question does suggest this question was aimed at finding out the number of cases where work was undertaken (although not sufficiently clearly to be confident):
“If you worked for a firm of Solicitors during 2016 please state: What percentage of your instructions were from your employer client, ie where you worked on costs issues as a result of litigation on which your firm was instructed.”
I am fairly sure that this question is aimed at discovering the source of work undertaken by Costs Lawyers, rather than the nature of the instructions received. If that is so, then the use of the phrase “as a result of litigation” is clearly not meant in the proper sense of: has a matter become litigated (ie have proceedings been issued). If a Costs Lawyer employed by a firm of solicitors worked exclusively on personal injury claims handled by that firm, it would not matter what proportion of those claims were litigated or non-litigated (noting the majority of personal injury claims settle pre-proceedings). The expected answer would be 100% regardless.
But I am then struggling to understand what the phrase “as a result of litigation” is meant to signify. Is this meant to expressly exclude, say, non-contentious Court of Protection work? Instructions “from your employer client” is not necessarily remotely the same thing as instructions from your employer client “as a result of litigation”.
Although these questions are meant to assist the CLSB better understand the work undertaken by Costs Lawyers, I am not convinced the CLSB has properly understood what it was asking and has certainly not phrased the questions with sufficient clarity to be confident there will be any consistency in the answers received.
Independent economists have criticised the government’s planned personal injury reforms on the basis the reforms would benefit insurers at the expense of consumers and taxpayers.
The term “independent” is perhaps relative given they were instructed to review the reforms by the Law Society, Association of Personal Injury Lawyers and Motor Accident Solicitors Society. Here we see the same interesting phenomena that occurs in personal injury claims where the “independent” medical expert instructed by the claimant produces a report favourable to the claimant and the “independent” medical expert instructed by the defendant produces a report favourable to the defendant.
None of this is to suggest that the contents of the report are inaccurate or misleading, but it is doubtful the addition of the word “independent” adds anything. Frankly, the fact this review was undertaken by “economists” is not much of a recommendation itself given the recent accuracy of most economists’ predictions.
In any event, when in human history has a special interest group commissioned a report that reached a conclusion contrary to the interests of that group? If it has ever happened, the report never saw the light of day.
The run up to Christmas brought us a number of interesting costs developments.
A decision from Master Rowley in the Senior Courts Costs Office throws new confusion onto the issue of proportionality. In King v Basildon & Thurrock University Hospitals NHS Foundation Trust he expressly disagreed with the decision of Master Gordon-Saker in BNM v MGN that additional liabilities should be subject to the new proportionality rule.
This would be less of a problem if the appeal in BNM v MGN was to proceed in early 2017, as appeared to be the position until recently. The date for the hearing has now been pushed out to October 2017. We are now faced with the prospect of having to wait almost 4½ years from the introduction of the new proportionality test until any kind of guidance is given by the higher courts. This makes the comments of Lord Neuberger, made back in 2012, all the more farcical:
“It would be positively dangerous for me to seek to give any sort of specific or detailed guidance in a lecture before the new rule has come into force and been applied. Any question relating to proportionality and any question relating to costs is each very case-sensitive, and when the two questions come together, that is all the more true. The law on proportionate costs will have to be developed on a case by case basis. This may mean a degree of satellite litigation while the courts work out the law, but we should be ready for that, and I hope it will involve relatively few cases.”
Since when was it dangerous for litigants or litigators to know how the law was to be applied?
Having decided that additional liabilities were to be excluded from consideration of proportionality, Master Rowley found that base costs of £88,337 would “almost always” be proportionate for the type of clinical negligence case he was assessing that proceeded to a 3-day trial and settled for £35,000. However, he held that if additional liabilities had been subject to the new test, the total assessed costs of £234,000 would have been unlikely to be proportionate. This does rather beg the question as to where between £88,337 and £234,000 the tipping point is for damages of only £35,000.
I have not seen the full judgment, but the decision that £88,337 would “almost always” be proportionate for this type of case is not easy to understand. It is no doubt correct that the new proportionality test is not limited to consideration of the sums in dispute only, but also the value of any non-monetary relief, the complexity of the litigation, any additional work generated by the conduct of the paying party and any wider factors involved in the proceedings, such as reputation or public importance. In this case it appears that “complexity” was probably the only relevant factor (plus possibly conduct). However, this is the conceptual problem with these other factors. What additional amount in costs are proportionately incurred to reflect non-monetary factors? If this had been a routine personal injury claim that had settled for £35,000, what would have been the maximum proportionate figure? How much additional complexity is required to justify each additional £10,000 worth of costs?
I rather suspect that Master Rowley’s conclusion that base costs of £88,337 would “almost always” be proportionate to incur for a case such as this was based on his experience that this level of costs was not unusual for a clinical negligence that proceeded to a 3-day trial. If that is correct, it seems there is a distinct danger that pre-Jackson levels of costs will be taken as a bench-mark for what is proportionate. Surely the whole purpose of the new Jackson proportionality test was to stop previously disproportionate levels of costs being recovered, not to rubber-stamp similar levels of expenditure.
No doubt part of his reasoning mirrors his earlier proportionality decision in May v Wavell Group that:
“The proportionate amount of costs must inevitably be smaller for a case which concludes early than one which reaches a final hearing.”
Given King proceeded to a 3-day trial, this was no doubt a factor that influenced his decision that the costs here were proportionate. I am not sure this should be a relevant factor. It runs the danger of confusing what work was reasonable and necessary (the old proportionality test) with what total costs are proportionate. Inevitably, a matter that proceeds to trial will involve additional costs compared to one that does not, but that is simply part of the first stage of the assessment process. It is noteworthy that CPR 44.3(5) does not list the amount of work undertaken or the stage at which the matter settled as being relevant factors when considering whether costs are proportionate.
An excellent blog post from Kerry Underwood highlights the future problems faced by RTA lawyers as a result of the development of driverless cars. It is clearly correct that this will lead to a massive drop in the number of RTA accidents with a major knock-on impact on claims work in this area. As Kerry observes, this may make all the fuss about increasing the personal injury small claims limit and scrapping or restricting general damages claims in minor soft tissue injury cases entirely redundant.
Obviously, this will also be another nail in the coffin for those Costs Lawyers and law costs draftsmen who undertake the small amount of remaining work in this area. But this is just the tip of the iceberg. It will also have a dramatic impact on insurer claims handlers, car mechanics, car hire firms and medical agencies and experts, not to mention a welcome reduction in work for real doctors and nurses as a result of less RTAs.
Even this is likely to be overshadowed by the impact driverless cars will have on the 10,000s working as taxi and minicab drivers, couriers and delivery drivers (with a disproportionate impact on many of the more recent arrivals to this country).
And then we have the claims that robots will begin to take over the work of millions of workers in the next few years.
This may not be an entire disaster. Human history is a continuous story of new technology fundamentally changing the nature of employment. You may well have met someone called Fletcher but it is unlikely you have ever met anyone who makes arrows for a living.
Nevertheless, change invariably produces losers in the short term, whatever long-term benefits it may bring.