Business Environment Bow Lane Ltd v Deanwater Estates Ltd
Where a claimant has picked up one or more costs orders in its favour on the way to a trial, but fails very badly at the trial (for example due to exaggeration), can the costs judge assess those costs at nil on the footing that they were not, as it turned out, reasonably incurred because they had been incurred in an action that sought an exaggerated sum which should never have been claimed? No, according to Business Environment Bow Lane Ltd v Deanwater Estates Ltd [2009] EWHC 2014 (Ch).
The 2010 edition of the Association of Law Costs Draftsmen's diary contains advertisements from six barristers' chambers holding themselves out as specialists in legal costs matters. Five of these give the names of the barristers in their costs teams. The number of named individuals totals 49. There are a number of other chambers who have costs specialists who did not advertise in the diary. So how many specialist costs barristers are there? There were a large number of names I did not recognise and it may be that there is a certain amount of wishful thinking going on as to who can be properly described as a costs specialist. Alternatively, it may be that they operate in areas of costs law that I do not deal with and our paths therefore do not cross.
A number of years ago, and before there were anything like the current number of specialist costs counsel, a senior judge (can anyone remind me who?) expressed displeasure about the fact that the complexity and number of legal costs disputes had reached the level that some lawyers were basing their whole career on costs matters.
Quite how many will be left in the post-Jackson world remains to be seen but their prospects are probably better than those of a large number of costs draftsmen.
Arguably, Lord Justice Jackson's most significant recommendation, in his Final Report, is an end to recovery between the parties of success fees.
This proposal will lead to obvious and huge savings to defendants. Those who think that current political uncertainty will lead to much of the Report being shelved should think again. Whichever party is in power after the general election, there will be a pressing need to control public expenditure. In terms of the money paid out by the NHSLA alone, and ignoring all the other areas where the public purse pays for litigation, this will be a compelling reason to adopt this recommendation. This is great news for defendants but really bad news for claimant lawyers.
Yes, solicitors can still enter into CFAs with their clients and charge a success fee. But there are two big problems. Firstly:
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Heavy advertising in recent years telling potential claimants that they will keep 100% of their damages will make it very unattractive for claimant solicitors to now start taking a cut of their clients' damages. There will be enough firms who decide to take the hit themselves that others will be forced to follow. Success fees in personal injury claims are likely to disappear. For the lower-end RTA claims, the loss of the 12.5% success fee will not be dramatic but it will come straight from solicitors' profit margins. It is likely to discourage some claims from being pushed to trial where the incentive of the automatic 100% success fee will disappear. On the other hand, the removal of the 100% threat will encourage defendants to take more cases to court, especially in relation to quantum disputes.
Even if firms do feel able to charge success fees, Jackson LJ's proposed cap will limit to a large extent the amount that can be charged. Not only is a cap of 25% of damages recommended, but Jackson LJ's master-stroke is that this cap will exclude damages referable to future loss. The element of damages that claimants will be required to pay as success fee will be limited to the general damages and past losses. In heavy litigation, and in particular catastrophic injury and clinical negligence claims, the cap is going to bite significantly in a high proportion of claims. This will have a big impact on profit margins for some firms.
The claimant lobby has been arguing that this proposal will reduce access to justice. This argument fails for a number of reasons. These proposals largely revert the position to the one that existed prior to the Access to Justice Act 1999. As Jackson LJ happily notes: "During 1996 APIL confirmed that those arrangements provided access to justice for personal injury claimants and that those arrangements were satisfactory". He further notes: "In this regard, it is significant that in Scotland personal injury cases are conducted satisfactorily on CFAs, despite the fact that success fees are not recoverable". Until recently, most BTE work and trade union work was conducted on unwritten speccing arrangements. It is not obvious that recoverability of success fees brought about an increase in the kind of claim that was pursued. The same kind of claim will still be run but the profit margins will shrink.
The Jackson package, and in particular this recommendation, is designed, at least in relation to personal injury work, to reduce legal costs at the expense of claimant lawyers. And that can be no bad thing.
I have recently been commenting on the forthcoming publication of Civil Costs - Law and Practice, a new book by Dr Mark Friston. To give you some idea as to the scope and ambition of this book have a look at this sample chapter (external link).
This chapter deals with the important topic of contracts made away from solicitors' places of business. If this looks like a difficult and obscure subject that you can ignore, think again. If a solicitor's paperwork is not in order their bill will be unenforceable. In the current edition of Claims Management magazine, Andrew Twambley, managing partner at Amelans, wrote: "Well, I have a word from the dark side - from the deepest annals of defendant burrows, from behind the largest rock - that an attack is imminent. Mark my words, brace yourselves and hope you are not the ones chosen by them, to be the receivers of test litigation".
The recent case of Ahmed v Aventis Pharma Ltd [2009] EWHC 9052 (Costs) dealt with two small issues but both ones of interest.
Firstly, following the decision in Crane v Canons Leisure Ltd [2007 EWCA Civ 1352, where solicitors outsourced the job of sorting and summarising medical records they could treat this work as forming part of their profit costs rather than being treated as a disbursement, and thereby make a profit on this work.
The second issue considered whether photocopying charges were recoverable. CPD 4.16(5) states: "The cost of making copies of documents will not in general be allowed but the court may exceptionally in its discretion make an allowance for copying in unusual circumstances or where the documents copied are unusually numerous in relation to the nature of the case".
Master Gordon-Saker dealt with the matter in this way: "Photocopying charges will generally only be allowed where they are exceptional, otherwise they are considered to fall within the solicitor's overhead. To my mind what is exceptional will have to be measured by the facts of the particular case. In a case where the profit costs are less than £7,000 it would be unusual to see the generation of 2,540 photocopies. Accordingly I would view this as exceptional and allow the sum of £154.80 claimed as a disbursement". This is no doubt correct. What might be considered exceptional in a low value matter may not be exceptional in a substantial piece of litigation.
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