Costs counsel Andrew Hogan gave a very interesting talk at this year’s Association of Costs Lawyers’ Annual Conference on costs budgeting.
The main theme of the talk was the absence of any objective criteria by which to judge whether costs budgeting has achieved its aims since being introduced. Although Andrew Hogan makes the point much more eloquently and in more detail, this is a problem I identified in a blog post when costs budgeting was first being introduced.
This is what I said back in October 2012:
“The aim of costs budgeting, that will be rolled out nationally from April 2013, is to control the level of costs that are incurred. There are a large number of unpredictable factors as to whether this aim will be achieved. However, let those make a couple of assumptions:
If the judiciary hopes to limit costs to no more than the levels currently been incurred they would need to reduce the budgets submitted by claimants by an average of one-third.
In fact, if the aim of costs budgeting is to reduce the amounts allowed below current levels it would be necessary to go further than that one-third. Reducing the budgets submitted by an average of 50% would only produce a relatively minor reduction on current figures.
Are judges really going to routinely reduce budgets by this margin?
The danger is that judges may think they are being “jolly robust” reducing budgets by an average of 25%, and thereby avoiding the need for matters to proceed to detailed assessment, and conclude that costs budgeting has been a great success.
The difficulty is that I have not seen any suggestion that the judiciary will have any accurate yardstick with which to compare the budgets being submitted with what might be deemed a “reasonable” allowance under the current system.
I would certainly not suggest that the very small proportion of cases that proceed to detailed assessment are indicative of “average” figures, let alone “reasonable” figures, but at least that would represent a starting point. I have heard no suggestion that the time or resources needed to analyse the data from detailed assessment hearings is being spent to give judges a guide as to what to allow in the budgeting process.
How is success therefore to be measured? A reduction in the number of cases that proceed to detailed assessment cannot be an adequate guide if the costs allowed under the budgeting process exceed current figures.”
I have written before about the dangers of relying on case summaries (particularly those that appear on-line) without actually reading the full judgment.
A prime example of this is the case of Engeham v London & Quadrant Housing Trust & Anor  EWCA Civ 1530. The problem was exacerbated by the fact that it has taken such a long time for the full judgment to become widely available.
The case concerned the “wrong” defendant being named in the CFA. This is hardly a new issue and I have acted for the paying party in two other reasonably well publicised cases dealing with this issue (Brierley v Prescott  EWHC 90062 (Costs) and Hailey v Assurance Mutuelle Des Motards (SCCO, 2015)).
In this case, the Court of Appeal decided that (some) costs were recoverable notwithstanding the fact the “wrong” defendant was named. Various initial on-line accounts of the decision implied that naming the wrong defendant was no longer a problem in light of this judgment, including:
“This is a helpful decision for receiving parties. It overturns a run of cases in the lower Courts which were decided the other way.”
“Whilst it is not unusual to have cases where there may be more than one potential Defendant, it is unusual to have cases where the correct Defendant(s) have not been named; this decision will now provide comfort to those solicitors who find themselves in this predicament. A small victory for Claimant solicitors…”
“an early Christmas present for Claimant Solicitors, and a lump of coal for Defendant Solicitors”
In fact, on a proper reading of the judgment, this decision was extremely fact sensitive and did not remove the underlying problem caused by naming the wrong defendant.
In very brief terms, so far as relevant, the facts of the case were:
“2. [APL] do pay the Claimant’s costs of this action, such costs to be assessed on a standard basis by way of detailed assessment if not agreement.
4. Upon payment by [APL] of the agreed sum and costs, [L & Q and APL] be discharged from all further liability to the Claimant in respect of the claims made by the Claimant in this action.”
The Court concluded:
“The first question is whether Ms Engeham’s action against L & Q was finally decided in her favour by an agreement to pay her damages. The answer to this question can only be ‘no’ if one reads into the win clause a requirement that it must be L & Q who actually pays the damages. I can see no reason why one should do so. It is necessary to distinguish between the scope of the CFA as regards the costs which it covers and the event which triggers the payment of those costs.
In my judgment, the parties could not have contemplated that a win was restricted to causing L & Q to be the payer, even if L & Q was the only anticipated defendant at the date of the CFA. I therefore consider that the ‘win’ clause in the CFA is not limited by reference to the identity of a person who actually pays the damages. Once one construes the CFA in that way, it seems to me that the Tomlin order it is plainly an agreement to pay damages within the meaning of the CFA. The fact that those damages were to be paid by APL and L & Q is not relevant.
…Ms Engeham can only recover the costs of pursuing L & Q to a successful conclusion, and that is what happened when the Tomlin order was signed. I therefore consider that the judge was correct to allow Ms Engeham her costs of her action against L & Q.”
However, the issue of wider impact was:
“Both Master Haworth and, on appeal, His Honour Judge Mitchell held that the CFA was limited in its operation to the action against L & Q. That was because of the express words of limitation in the ‘What is covered by this agreement’ clause to, ‘Your claim against the defendants L & Q for damages’. Those words were not wide enough to encompass an action against anybody else. On this further appeal, Ms Engeham does not seek to challenge those conclusions, and I consider that she was right to do so. It follows, that the only costs which she can now recover are costs which relate to her action against L & Q.”
(History does not relate how a costs judge was subsequently meant to distinguish and then apportion/divide, if at all, those costs of pursing L & Q as opposed to APL.)
The important point to note is that for many – probably most – cases where the wrong defendant is named, this decision will be of no assistance. The Court of Appeal has recognised that expressly naming one party as defendant in a CFA limits the scope of what the agreement covers. Perhaps the classic example of this problem arises where a CFA in a highway tripping claim names a local authority as defendant but it is subsequently discovered the correct defendant is actually another party (eg utilities company), with the claim then being successfully pursued against that other party. Ordinarily, and absent a rather unusual final costs order, there will be no recoverable costs given the limitation of the CFA.
An interesting foot-note to this decision is how this decision was reported in Costs Law Report’s monthly bulletin. This correctly summarised the decision but then concluded:
“As we have stated many times in this bulletin, CFAs made before 1 April 2013 have a long tail. Those coming up for detailed assessment soon should be checked to ensure that too much information does not result in disaster as happened in Engeham.”
Unless I have missed something, this case has nothing to do with pre-1 April 2013 CFAs or recoverable success fees. This was a matter of simple contract law as to what was, or not, covered by the retainer. It appears to be of equal application to CFAs being entered into now or, indeed, any form of retainer.
It was only recently that the press was reporting on David Beckham’s library burning down. He was described as being absolutely distraught. Apparently both books were destroyed and he hadn’t even finished colouring one of them in.
Now matters have reached the point where Beckham’s intellectual strengths have grown to such heights that it is being reported across the press, including the broadsheets and BBC, as actual “news” which way Beckham intends to vote in the EU Referendum.
There has already been enough bitter debate in the EU Referendum about the extent to which the advice of various “experts” should be trusted on the likely consequences of Leaving/Remaining, but can we at least agree that the views of “celebrities” are not relevant and are not “news”?
This follows on from Noel Edmunds advising the public they can cure cancer by wrapping tin foil around their heads (or something similarly scientific).
What next, the Chuckle Brothers making recommendations about reform of the civil justice system? Having said that, they are probably no more likely to make a dog’s dinner of that than some others one could think of.
Rather more serious analysis comes from Andrew Hogan, in an article originally published in Litigation Funding magazine suggesting:
“it does not seem fanciful to suggest that if the country votes to leave the European Union, the Ministry’s efforts for the next 20 years will be spent uncoupling the country’s laws from the European Union and all interest in fixed costs proposals and similar schemes, will just fall of the political agenda. It follows in turn that the financial interests of litigation lawyers will be served by voting for Brexit, the costs tail wagging the constitutional dog.”
Fortunately, litigation lawyers are far too public spirited to consider voting based on such narrow possible self-interest.
This blog is going to steer clear of making any predictions about how readers might benefit from Leaving/Remaining or from making any recommendations on how to vote. However, with the polls suggesting the vote is neck-and-neck, I will suggest this may come down to the weather on the day. As a European official was quoted in The Telegraph:
“A colleague of Mr Juncker fears that, ‘come hell, wind or high water’ the ‘Out’ side will turn out to vote: ‘They will be queuing round the block like at the end of apartheid South Africa.’”
With most polling suggesting Brexit supporters are more motivated to vote, bad weather on polling day may tip the balance in their favour.
Watch what the weather forecasters predict. At least they always get it right.
Much of the commentary on Master Gordon-Saker’s recent proportionality decision in BNM v MGN Limited  EWHC B13 (Costs) has understandably focused on the reductions made to the “reasonable” costs (approximately a 50% reduction). However, almost as interesting is what was not reduced.
To remind you of the figures, the Master initially assessed the costs, applying reasonableness alone as follows:
|Base profit costs||£46,321|
|Base Counsel’s fees||£14,687.50|
|Base costs of drawing the bill||£4,530|
|Atkins Thomson’s success fee||£16,780.83|
|Counsel’s success fee||£4,846.88|
Having concluded this was disproportionate he then, in his own words: “concluded that the sums which had been allowed as reasonable on the line by line assessment were disproportionate and were about twice the sum which would be proportionate. As I had been given the breakdown set out above I gave separate figures for the sums allowed”:
|Base profit costs||£24,000|
|Base Counsel’s fees||£7,300|
|Base costs of drawing the bill||£2,250|
|Atkins Thomson’s success fee||£7,920|
|Counsel’s success fee||£2,409|
It is not obvious to me that there was any need to provide a breakdown of the further “Jackson adjustment”. It seems artificial to rule that it was reasonable to spend, say, £10,000 on experts’ fees but that this will then be adjusted down to £5,000. The “Jackson adjustment”, as the second part of the proportionality test, is to ensure that the total the paying party is asked to pay is proportionate to the claim. This is concerned with the total, not the constituent parts of that total. The constituent parts are dealt with in the line by line element of the assessment.
Nevertheless, having decided to adopt that approach, the one striking part of the bill that was not reduced was the court fee element. This was left untouched.
On the one hand, I can see why a judge, particularly the Senior Costs Judge, might be reluctant to rule that court fees are disproportionate, with the implicit criticism of the Ministry of Justice (although many judges have done just that). However, does it not rather miss the point of the new proportionality test to leave them untouched?
The “Jackson adjustment” is not concerned with what it was reasonable or necessary for a receiving to incur in legal costs. It is solely concerned with what the paying party should pay as a proportionate amount.
The Master reduced the ATE premium by approximately 50% despite concluding it was a reasonable amount and necessary for the Claimant to incur. The Claimant presumably had no more control over the level of ATE premium than they did the courts fees. It was simply a cost they had to incur to pursue the claim.
Why should court fees be ring-fenced from the proportionality test?
Hot on the heels of Master Gordon-Saker’s proportionality decision in BNM v MGN Limited  EWHC B13 (Costs) is another decision from the Senior Courts Costs Office, this time from Master Rowley in Dr Brian May v Wavell Group Plc.
Here, the figures are even starker in terms of the reductions applied. The initial assessment, on the basis of reasonableness alone, reduced the bill from £208,236.54 to £99,655.74. The second part of the test, the “Jackson reduction”, reduced this to £35,000 plus VAT. The damages agreed were £25,000.
A fuller summary of the decision and a copy of the judgment can be found on the Civil Litigation Brief.
The stand out parts of the judgment are:
“The amount that can be recovered from the paying party is not the minimum sum necessary to bring or defend the case successfully. It is a sum which it is appropriate for the paying party to pay by reference to the five factors in CPR 44.3(5). It is not the amount required to achieve justice in the eyes of the receiving party but only a contribution to that receiving party’s costs in many modest cases.
In cases such as this, it seems to me that the new test of proportionality … will require legal representatives to inform their clients that, even if successful, they will receive no more than a contribution to the costs that will be incurred. It may be that such advice proves to be a driver for the costs to be reduced or for alternative dispute resolution mechanisms to be explored.”
In both this case and the earlier case of BNM v MGN Limited, Jamie Carpenter acted for the paying party. A rising star of the Costs Bar.
I’m delighted to announce that Gibbs Wyatt Stone has been named ‘Most Outstanding Law Firm of 2016, the UK’.
I was notified of this via an email from a Mandeep Singh from Wealth & Finance INTL magazine (no, I hadn’t either) advising that:
“following months of research by our in-house research team, Gibbs Wyatt Stone has been named as a ‘Most Outstanding Law Firm of 2016, the UK’. Since 2016 began, here at Wealth & Finance INTL we have been looking for some of the leading, most innovative, competitive and client-focused of law firms who have demonstrated truly marvelous things this year. … Only the most creative, forward-thinking and truly exceptional of law firms stand out from the crowd in these competitive times. In the modern legal environment both the very niche law firms as well as the international law firms can make a real impact within their jurisdiction(s) or specialist area(s), meaning that firms of all sizes have been considered here.”
I was told that if I wanted this news to reach their “130,000+ subscribers” there were various packages, ranging from £375 to £3,875 in cost, for different types of exposure in their online publication.
My excitement was only slightly muted by the fact I had received just the day before another email from Mandeep Singh advising:
“My name is Mandeep Singh and I am contacting you on behalf of Wealth & Finance INTL to inform you that Gibbs Wyatt Stone has been named as a winner in ‘2016’s Fund Manager Elite’ awards. … Over the course of the past two months, our in-house research team have been scouring the market in search of truly outstanding fund managers who have gained a reputation for providing their clients with the most innovative and successful money management and advisory services. All of this year’s winning firms have been drawn from across 8 categories (the details of which you can find below) and will be the sole representative from their country. This mean that you will be the only business based in the USA to appear in the publication, ensuring maximum exposure among your competitors and peers. … As a winner in this year’s awards, you are now free to publicise your success in any way you see fit. However, if you would like to get a head start on your promotional activities, we offer a number of advertising packages within our upcoming awards supplement that will help you to showcase your win and your firm in general to a global audience of more than 130,000 HNWIs, wealth management specialists and investors.”
Now, I’m obviously a very busy man and can’t be expected to remember every bit of work my firm has done over the last year, but I’m fairly sure I would have remembered if this had included being a fund manager in the USA.
It does make me begin to wonder whether these awards are worth the paper the online only Wealth & Finance INTL is published on.
The Master of the Rolls Lord Dyson has recently spoken out at his shock that there is a need for appeal judges: “Well paid judges at first instance should be able to get it right first time, every time. The fact that so many fail to do so causes parties to have to incur substantial further legal costs on appeals. Without the need for appeals, a whole swath of the judiciary would be freed up to deal with proper hearings rather than unnecessary time being taken up attempting to correct mistakes made by more junior judges”.
OK. He didn’t really say that. Why would a senior appeal judge think that appeals were a bad thing and a cause of unnecessary expense?
What he actually said was: “I am horrified that costs litigation is now a recognised specialism. Costs law is so complicated that there is a Costs Bar and Costs Law Reports”. Sadly, history does not relate what his subsequent reaction was to discovering that costs litigation has become such a blight on the law that a specialist court has had to be set up to deal with NOTHING BUT this area (dealing with 15,943 assessments in 2015) and there are now full time judges appointed to deal with NOTHING BUT costs litigation. I trust Lord Dyson had a lie down in a darkened room to recover.
Costs litigation may well be one good example of the complexity of the whole system but is it really any worse than whole swathes of the day-to-day work that appeal judges have to deal with? How many Court of Appeal decisions have there been trying to give guidance as to the proper operation of Part 36? Part 36 is meant to be a short and self-contained code. This is then compounded by the repeated re-drafting of Part 36 to try produce a rule that actually achieves its supposed ends because previous versions are perceived to have failed. I still see, on a virtually weekly basis, defectively drafted Part 36 offers. Admittedly, much of this is due to lazy lawyers, but the inherent complexities created by even this narrow rule must be a contributing factor.
The majority of appeals are as a result of a judge at first instance making a “mistake” as to what the law actually is. (And sometimes further judges making further mistakes at subsequent appeals which then, in turn, also need to be appealed.) The unsuccessful party to the appeal is expected to pay for those mistakes to be corrected.
The key to reducing the costs of litigation is to simplify the system. An increase in fixed costs is no doubt a part of that solution but this is surely just the tip of a massive iceberg. If the senior judiciary focused their minds on simplifying the system so that their own role became redundant, proportionate costs would no doubt follow naturally.
The issue of rights of audience at detailed assessment has reared its head again.
This was prompted by The Personal Injuries Bar Association, with the support of the Bar Council, writing to the CPRC over their concerns that solicitor’s agents – usually unregistered barristers – were increasingly being used to conduct advocacy in open court at stage 3 quantum-only hearings under the various personal injury pre-action protocols.
The letter said the exemption in the Legal Services Act 2007 from needing rights of audience was plainly drafted to confine it “to hearings which are held in private”, although the Act uses the now out-dated phrase “in chambers”.
Ignoring for the moment the merits of restricting rights of audience for certain types of hearing, this is poppycock.
CPR 39.2(3) deals with when a hearing may be held in private (the default position being that they are in public):
“A hearing, or any part of it, may be in private if –
(a) publicity would defeat the object of the hearing;
(b) it involves matters relating to national security;
(c) it involves confidential information (including information relating to personal financial matters) and publicity would damage that confidentiality;
(d) a private hearing is necessary to protect the interests of any child or protected party;
(e) it is a hearing of an application made without notice and it would be unjust to any respondent for there to be a public hearing;
(f) it involves uncontentious matters arising in the administration of trusts or in the administration of a deceased person’s estate; or
(g) the court considers this to be necessary, in the interests of justice.”
Why would the Legal Services Act be drafted to provide a specific exception allowing any unqualified unregulated muppet to attend, for example, a hearing concerning national security or concerning the interests of a child but exclude (with criminal consequences) attendances at what are often very routine hearings “in chambers” (that are now open to the public)? The exemption provided by the Legal Services Act does no more than preserve the position as it has always been for certain types of hearing. PD 39A, para.1.14 puts this beyond doubt:
“References to hearings being in public or private or in a judge’s room contained in the Civil Procedure Rules (including the Rules of the Supreme Court and the County Court Rules scheduled to Part 50) and the practice directions which supplement them do not restrict any existing rights of audience or confer any new rights of audience in respect of applications or proceedings which under the rules previously in force would have been heard in court or in chambers respectively.”
ACL chairman Iain Stark was reported as saying:
“Before Costs Lawyers, the courts utilised the legal myth of a so-called solicitor’s agent, notwithstanding that arguably these individuals had no rights of audience.”
Again, ignoring the issue of the merits of limiting rights of audience, the only “myth” is that the courts ever utilised a “legal myth” to allow rights of audience to law costs draftsmen, etc.
Rights of audience were previously governed by Section 27 of the Courts and Legal Services Act 1990 which, so far as relevant, read:
“Rights of Audience
(1) The question whether a person has a right of audience before a court or in relation to any proceedings, shall be determined solely in accordance with the provisions of this part.
(2) A person shall have a right of audience before a court in relation to any proceedings only in the following cases:
(e) where –
(i) he is employed (whether wholly or in part) or is otherwise engaged to assist in the conduct of litigation and is doing so under instructions given (either generally or in relation to the proceedings) by a qualified litigator; and
(ii) the proceedings are being heard in Chambers in the High Court or a County Court and are not reserved family proceedings.”
Given there was previously no dispute that detailed assessments were heard “in chambers”, the language of the act unambiguously allowed law costs draftsmen, outdoor clerks, paralegals, etc to attend such hearings where they were: “otherwise engaged to assist in the conduct of litigation and is doing so under instructions given (either generally or in relation to the proceedings) by a qualified litigator”. They did not need to be “employed”. Where is the “legal myth” there?
Our latest Costs Law Update on the important decision in BNM v MGN Limited  EWHC B13 (Costs), where a “reasonable” bill was “slashed” by 50% on the basis of the new proportionality test is now available.
The 2016/17 edition of the Costs & Fees Encyclopaedia has recently been published. It describes itself as the “comprehensive compendium of costs and fees for civil and criminal lawyers”.
This is a reference book entirely devoid of commentary and its value to potential readers can really only be judged by describing the contents. The book runs to 521 pages.
Pages 1-99 consist of the relevant costs provisions of the CPR and Practice Directions (Parts 3, 36 and 44-48 and a short section summarising the different J-Codes. You might describe these pages as “White Book light”. The book is described as “one handy, portable volume”. It is portable in the sense that any book is, but the bulky A4 format does not obviously lend itself to being something to take to court. I also doubt the average judge would find it helpful when asking where to find a particular rule if he is referred to the relevant page of the Costs & Fees Encyclopaedia rather than the White Book (or, possibly, the Green Book). In reality, this is a desktop reference guide. Whether, given the continuous amendments to the costs rules and practice directions, most readers prefer to use a physical book that may contain slightly out of date versions or check online is a matter of choice.
Pages 100-101 contain The Offers to settle in Civil Proceedings Order 2013 and The Recovery of Costs Insurance Premiums in Clinical Negligence Proceedings Regulations 2013.
Pages 102-103 contain the fixed costs for solicitors and public authority deputies in care proceedings.
Pages 104-109 contain the Guideline Hourly Rates for Summary Assessment back to 1999. Some geographical locations have occasionally moved band during this period but I do feel this information could have been presented in slightly more attractive manner (eg a one page grid).
Pages 110-126 consist of the Civil Legal Aid (Remuneration) Rates: Extracts from the Civil Legal Aid (Remuneration) Regulations 2013.
Pages 127-228 deals with Costs in Criminal Proceedings and includes:
I defer to those who deal with criminal costs to judge the usefulness of this section.
Pages 239-232 includes Motor Mileage rates, VAT rates and IPT rates.
Pages 233-436 covers an electric mix including:
This is perhaps where the real value of this book is to be found: the bringing together of such a wide selection of information in once source.
Pages 437-492 contain various case summaries from Costs Law Reports divided by topic. This is a section I struggle with. By way of example, under the “Proportionality” section is the following:
“Home Office v Lownds  2 Costs LR 279. The relationship between reasonableness and proportionality.”
As a reference/research tool, it is difficult to see the value in such an entry. What level of court made this decision? Has it been overturned and, if so, in which case? Have further rule changes rendered the decision redundant? What was actually decided? Other than laboriously reading this, and every other case referred to under the same section in full, it is hard to see how this assists a costs litigator wanting to discover the law on this issue or find cases to support/oppose a particular position. Brevity has much to commend itself, but there are limits as to how short something can be before it ceases to be of any use.
Pages 493-519 contain the SRA Code of Conduct 2011.
Pages 520-521 contain a list of relevant court forms.
The price, a modest £65 including p&p for the print version or £85 plus VAT for the print and digital bundle.