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Fixed costs confusion

Posted by on 17th November 2016 in Uncategorised | 1 comment

There have been two decisions in quick succession from the Court of Appeal in relation to the operation of the various fixed fee regimes.

Bird v Acorn Group Ltd [2016] EWCA Civ 1096 was a public liability claim that was withdrawn from the portal due to the defendant’s failure to respond.  Liability was admitted by the Defendant shortly thereafter.  In the absence of settlement, proceedings were issued.  The Defendant failed to file an Acknowledge of Service and the Claimant obtained default judgment, with the claim then being listed for a disposal hearing but settling in advance.

The Court of Appeal ruled that listing a portal ‘drop out’ case for a disposal hearing is listing for trial, meaning that it attracts column 3 fixed costs if it then settles.

Briggs LJ held:

“In every case where a claimant obtains judgment for damages to be assessed, followed by a disposal hearing for that assessment, there will be a progression from column 1 (which comes into force when proceedings are issued) to column 3, when the disposal hearing is listed.

The fact that column 2 is jumped over because there is no intermediate allocation to the fast-track seems to me to be just one of those events which means that the three columns will not always be triggered in succession. But that by no means undermines the good sense of a conclusion that, once there has been a listing for a disposal hearing, column 3 is triggered.”

In Qader & Others v Esure Services Ltd [2016] EWCA Civ 1109 the Court of Appeal held that the Fixed Recoverable Costs Regime does not apply to a claim started in the RTA Portal, which subsequently exited the portal and was allocated to the multi-track after proceedings were issued under Part 7 of the Civil Procedure Rules.

The Court concluded there was a drafting error in the rules and the best way to give effect to the intention was to add, to Part 45.39B, after the references to 45.29J:

“… and for so long as the claim is not allocated to the multi track”

Kerry Underwood comments on this decision:

“The result may be just, but the Court of Appeal accepted that to achieve that result it needed to add in words to the Civil Procedure Rules, even though there was no irrationality in the wording and no irrationality or inherent unfairness in giving effect to that clear wording.

The lead, and only judgment, was given by Lord Justice Briggs, author of the extremely controversial report proposing to abolish court hearings for most claims under £25,000. Here, as a judge, he re-writes the law passed by Parliament, to reflect what he thinks was the minister’s and the Government’s – not Parliament’s mind – intention. … The decision is a constitutional outrage…”

Ignoring the issue of the route by which these decisions have been reached, we are now several years into various fixed costs regimes that were intended to simplify matters.  Instead we are still seeing matters being fought out in the Court of Appeal as to what the rules actually mean and with the judiciary, on occasion, having to expressly re-write what they clearly say.

And the senior judiciary calls for a further extension of fixed costs.  You couldn’t make it up.

Costs Lawyer survey

Posted by on 1st November 2016 in Uncategorised | 1 comment

The Costs Lawyer Standards Board has just issued a new client survey form.  Costs Lawyers are asked to print and issue to clients: “(i) Now for current clients; (ii) With your client care letter for new clients going forward; (iii) Once an instruction has completed (by way of reminder)”.

A copy of the form can be found: here.

Matters do not get off to a very good start as the form asks clients to complete and post back to the CLSB.  There appears to be no option to complete online and there is no Freepost address, meaning clients must pay the postage in addition to their own lost time completing the form.  The majority of Costs Lawyers’ clients will be other lawyers who are notoriously rubbish at completing surveys in any event (see, for example, the difficulties trying to obtain data for hourly rates).  I suspect the feedback rate would struggle to hit 1% simply on the back of the response method.  (At least the CLSB has not asked Costs Lawyers to provide a stamped addressed envelope with each form.)

A slightly higher response rate may be obtained from clients in relation to solicitor/own client disputes (although the form does not ask the client to identify the nature of the instructions).

Admittedly, the form itself is not overly onerous but will still take some minutes to complete.  A number of questions require cross-referencing with the original client care letter.  Most busy lawyers would not bother to complete the form for this reason alone.  (And no prize on offer for those who do.)

It appears to be envisaged that this form will be sent with each set of instructions received, rather than once to each client.  I have some clients who send 100s of new cases each year.  There is obviously 0% prospect they will complete the form at the conclusion of each case and then post 100s of forms to the CLSB (at their own expense).  Being optimistic, it is possible a client who instructs us in 100s of cases each year might complete the form once.  This is probably as likely as a client who sends us one case each year.  The form includes questions relating to client satisfaction.  It is therefore likely that any conclusions drawn from responses received by the CLSB will give equal weight to the single response from the client who sends 100s of instructions (and will presumably be happy with the service received) as the client who sends but one instruction.  100s of cases handled well will count for no more than one case handled badly.

The main problem, of course, with this type of survey is the driver that may persuade some clients to complete this form: dissatisfaction.  The unhappy client is much more likely to complete the form that the happy client who continues to send repeat instructions.  Unfortunately, there is no way for the CLSB to know whether the responses are in any way typical of the service being provided.

The CLSB will try to draw conclusions from self-selecting respondents based, almost certainly, on a response rate of dramatically less than 1%.

In one sense, the CLSB has no choice but to issue these surveys.  They are under a duty to investigate the Costs Lawyer profession and try to understand whether clients are receiving a good service.  It is not obvious that there is good alternative to this type of survey.  I just hope that if, and when, any analysis is published based on these forms that the number of completed forms is clearly identified and an attempt is made to calculate the rough proportion of work undertaken by Costs Lawyers this represents.

Sometimes no survey at all may be better than one that produces misleading conclusions.

Costs lawyers’ rights of audience at CCMCs

Posted by on 24th October 2016 in Uncategorised | 1 comment

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:

  • The exercise of a right of audience
  • The conduct of litigation
  • The administration of oaths

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:

  • the proceedings are at first instance; or the proceedings include an appeal below the level of the Court of Appeal or Upper Tribunal, are on a first appeal (other than in the Court of Appeal) and the appeal itself relates to costs; or
  • the proceedings do not fall within either of the categories above, but your instructions are limited to dealing with the costs of the proceedings; or
  • the court or tribunal grants permission for you to conduct proceedings or to represent a client (or both).

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:

  • relate solely to costs; or
  • when they relate to other issues, solely those issues that are not in dispute.

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 between opposing parties including costs management and budgeting.
  • Solicitor and client costs but not if and to the extent that issues of negligence arise when a Lawyer competent to deal with allegations of negligence ought to be instructed instead.
  • Legal aid, criminal costs, wasted costs or costs against third parties.”

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.

Why are more costs budgets not agreed?

Posted by on 3rd October 2016 in Uncategorised | 1 comment

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?

  • Schedules of special damages are no doubt prepared with considerable expertise, but in an adversarial system who would possibly expect a claimant’s schedule to be agreed by a defendant simply because of the expertise that went into its preparation?
  • Costs budgets rarely give the name of the person responsible for drafting the same. On what basis does an opponent therefore have to believe that any given costs budget has actually been prepared with any degree of expertise?  I routinely receive CVs from recruitment agencies stating a costs draftsman with under 2 years’ experience is “experienced” at drafting costs budgets.  What opponent would accept the accuracy of such a budget?
  • Practitioners know that a court will rarely allow more than an agreed/approved budget. If a party believes they may be the receiving party, they will therefore wish to ensure their budget will be at least as great as the level of costs that they are likely to incur.  Budgets are therefore routinely prepared on the basis of a worst case scenario with the resultant figure then being doubled to be on the safe side.  This may be a budget that has been prepared with “expertise” but in unlikely to be the basis for something that will be agreed.
  • Let us take adopt a generous approach and assume that the majority of litigation is conducted with a degree of “expertise” and, at the end of a case, any Bill of Costs is also prepared with expertise. Why trouble with costs budgeting and detailed assessment at all?  Surely the costs claimed will be reasonable simply by virtue of the expertise brought to the case.

You couldn’t make it up.

Referring to Part 36 offers in detailed assessment proceedings

Posted by on 27th September 2016 in Uncategorised | 4 comments

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 [2016] 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.”

Extension of fixed fees

Posted by on 16th September 2016 in Uncategorised | 1 comment

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.”

Timing of orders for interim costs payments

Posted by on 27th July 2016 in Uncategorised | 3 comments

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:

  1. At the same time an order for costs is being made (usually following a trial).
  2. After a request has been filed for a detailed assessment hearing.

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 [2016] 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 [1973] 1 WLR 19, CA. This power is not restricted to exceptional circumstances: Re L (Children) [2013] 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.

Offers in detailed assessment proceedings

Posted by on 25th July 2016 in Uncategorised | 0 comments

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:

  1. All open offers accompanying points of dispute are low speculative offers that will be increased on.
  2. Where such an offer is rejected (whether expressly or by way of counter-offer or alternative Part 36 offer), the offer can still be accepted at a future date.

 

Law Costs Firm of the Year – Gibbs Wyatt Stone

Posted by on 22nd July 2016 in Uncategorised | 2 comments

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:

“Dear Mandeep,

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.

Kind regards,

Simon Gibbs”

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.

Kind regards

Mandeep Singh”

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.

Date to file costs budgets

Posted by on 19th July 2016 in Uncategorised | 3 comments

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:

“CPR 3.13(1)

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.