The Court of Appeal has given an important judgment on the issue of the costs of provisional assessment. In W Portsmouth and Company Ltd v Lowin  EWCA Civ 2172, the Court ruled that the £,1500 cap on the costs of provisional assessment continues to apply even where a party has succeeded on a Part 36 offer made in the assessment proceedings.
This is to be distinguished from the situation where a party succeeds on a Part 36 offer in relation to a fixed fee matter. In that case, Part 36 trumps fixed fees (as per Broadhurst v Tan  1 WLR 1928).
This is a sensible decision and should speed up the provisional assessment process by reducing the scope for argument and ensure the overall costs are proportionate.
Interestingly, an unnamed spokesman for the Association of Costs Lawyers was reported as commenting:
“While the clarity provided by the ruling was needed, the outcome is very harsh for costs lawyers.
There will be plenty of cases where the paying party does not accept a part 36 offer and instead causes the other side to spend significantly more than £1,500 in dealing with costs issues.
But on beating their own offer at assessment, the receiving party enjoys all the usual benefits, except in relation to this one aspect of their case. And it will be their costs lawyer who suffers through no fault of their own.
We call on the Civil Procedure Rule Committee to consider the impact and fairness of this ruling – making this exception seems at odds with the thrust of the whole part 36 scheme.”
I am not sure I agree.
Plainly, this decision will have no adverse impact on in-house Costs Lawyers.
It will also have no impact on Costs Lawyers employed by costs firms.
I believe the “harsh” outcome being described was intended to mean: “Costs Lawyers who own their own costs firms and who conduct costs litigation on a CFA Lite basis will lose out because they will be unable to recover any shortfall between the work undertaken and the cap of £1,500”.
I do not know how common it actually is for costs firms to agree to limit their fees to the level of costs recovered from the other side.
More to the point, although there will clearly be some exceptions, generally the reason the level of costs exceeds the £1,500 cap in provisional assessment matters is because:
- The receiving party has ignored PD 47 para.12.1: “A reply served by the receiving party under Rule 47.13 must be limited to points of principle and concessions only. It must not contain general denials, specific denials or standard form responses”; or
- the paying party has ignored PD 47 para.8.2: “Points of dispute must be short and to the point. They must follow Precedent G in the Schedule of Costs Precedents annexed to this Practice Direction, so far as practicable.”
If Costs Lawyers comply with the Practice Direction, their costs of assessment should rarely exceed the cap.
The Court of Appeal decision in BNM v MGN Ltd  EWCA Civ 1767 manages to be both very important and a massive anti-climax.
The decision is important because it finally resolves the issue of whether post-1 April 2013 additional liabilities are subject to the old or new proportionality test. The answer is that the old test applies (contrary to Master Gordon-Saker’s original decision). Although this will potentially have a large impact on the costs recoverability of some big-ticket costs claims, this is mainly limited to a dwindling number of old cases (4½ years and older).
What the judgment entirely fails to do is give any wider guidance as to how the new test should be applied. Even on the facts of the case, we still do not know the answer as the matter is to be referred back to Master Gordan-Saker for him to have another go.
In light of the problems facing ACL Training, I commented that: “It seems unlikely it can possibly continue in its current form”.
Unsurprisingly, the CLSB has now announced that it is to suspend any further intake onto the current three year Costs Lawyer qualification.
The CLSB “will now focus on other means of entry into the profession e.g. Costs Lawyer competence test, apprenticeship, thus assuring standards expected of a regulated profession are met”.
The negative impact of the Jackson reforms continues apace.
Virtually simultaneous to the news about Just Costs, is the announcement that defendant costs firm Cost Advocates is to close at the end of the year.
As an example of the rise and fall of the costs industry, Cost Advocates’ story is, perhaps, even more dramatic than that of Just Costs.
Cost Advocates (then Cost Auditing) was purchased by outsourcing giant Capita in 2002 for an initial consideration of £4.9m in cash with additional deferred payments of potentially another £3m.
The inevitable post-Jackson shake down continues to make itself felt across the industry.
Back in December 2016, costs firm Just Costs Ltd entered into a company voluntary arrangement (CVA) due to significant debts including owing £781,758 to HM Revenue & Customs.
In a statement at the time, the firm said:
‘The business has traded profitably every year since our inception in 2006. We continue to do so and our forecasts moving forward show continued profitability. We continue to have the total support of our bank and funders. … We will be meeting our liabilities in full. … We are dealing with work of an ever-increasing value and complexity. It is business as usual.’
Presumably matters did not go quite as smoothly as anticipated as Just Costs Ltd has just folded, only to be reborn as Just Costs Solicitors Ltd by means of a pre-pack administration deal.
Back in December 2016, it was explained that Just Costs had “consolidated” from four to two offices and reduced its headcount from 110 to 70.
The latest statement, explaining the CVA, states that it has saved 46 jobs.
It is clearly a good thing that so many jobs have been saved but 46 must be viewed as against 70 less than a year ago and 110 before that.
It must not be overlooked that these job losses have come about following just the first wave of the Jackson reforms, with the negative impact being felt largely in the fast-track arena. The next wave of reforms has yet to strike.
The Solicitors Regulation Authority has an online guide about Costs and Legal Aid for members of the public.
In relation to Conditional Fee Agreements, it states:
- “your lawyer will only get paid if the case is successful. If you lose your claim, your lawyer does not get paid”.
Am I alone in being concerned that the SRA appears to be unaware of discounted CFAs?
It then lists a number of bullet points as to what happens where a claim is run under a CFA and the claim is successful. The first of these is:
- “you receive 100% of any compensation awarded”
Where does this come from? There has never been a statutory or regulatory requirement that claimants keep 100% of their damages. True, in the past there were many firms of solicitors that made such a promise; but this was not an inherent element of a CFA. Post-Jackson, this is now relatively uncommon.
Further bullet points state:
- “the ‘success fee’ can be up to 100% of your lawyer’s costs, however in personal injury cases, this is limited to 25% of the damages awarded (excluding any damages for future care and loss),
- the losing side will have to pay your lawyer’s costs and any expenses that you may be liableto pay as part of your legal costs,
- you will however have to pay the success fee to your lawyer. It is therefore very important that your lawyer properly informs you at the very beginning of the success fee that will be payable if you win your case.”
Remember, this guide is for members of the public. How are they meant to interpret the contradictory statements that they will get to keep 100% of their damages but, in personal injury cases, may have to pay a success fee of up to 25% of their damages.
It is also fairly obvious that the SRA is unfamiliar with the concept of solicitor/own client costs.
If a solicitor produced a client care letter with so many misleading statements, they would rightly be hauled over the coals.
And this was produced by the body which is meant to police solicitors.
Last week’s annual ACL Conference saw speakers include:
Lord Justice Jackson
Senior Costs Judge Master Gordon-Saker
Costs Judge Master James
Regional Costs Judge Besford
Regional Costs Judge Lethem
Regional Costs Judge Lumb
Regional Costs Judge Middleton
Nicholas Bacon QC
Simon Browne QC
PJ Kirby QC
Andrew Post QC
Vikram Sachdeva QC
Dr Mark Friston
Professor Dominic Regan
There are clearly some outsiders who believe the ACL is getting something right.
Two of the Regional Costs Judges present told me they had taken Friday as annual leave so they could attend the conference. This suggests a number of possible things:
- The ACL Annual Conference is THE legal event of the year.
- The ACL Annual Conference is THE social event of the year.
- Some judges need to get out more. (To be fair, this conference is not so much the highlight of my social calendar, rather the only entry.)
The only body authorised to provide the Costs Lawyer qualification is ACL Training. This is wholly owned by the Association of Costs Lawyers. This is not a stich up but simply a reflection of the fact the demand for training has always been so limited that no other academic organisation would dream of trying to set up an alternative training programme and jump through the hoops required to obtain authorisation.
ACL Training has gone through a strange period.
Back in September 2014 it was announced, with some fanfare, that almost 200 students had signed up to the new training course to become Costs Lawyers. The exact number was, apparently, 189.
The number of new students for that year was always misleadingly high:
- There had been no new students enrolled the previous year as the course had been suspended whilst it was comprehensively redesigned post-Jackson. In reality, it was two years’ worth of students rolled into one.
- The figures included a number of experienced law costs draftsmen who had finally decided to make the jump to become qualified Costs Lawyers. This was, no doubt, partly in the belief that formal qualification would enhance employability in a post-Jackson world where the number of costs jobs was likely to decline.
- As this was shortly after the Jackson reforms had been introduced, this was in the rather artificial environment where costs budgeting was generating additional work but the adverse impact of Jackson had not yet started to work through into the system. In some quarters, during this brief period, it looked as though overall work levels might not drop. This no doubt encouraged some to seek qualification.
The recent edition of Costs Lawyer magazine records 97 students as having recently taken final year exams. This would be from the 2014 intake of 189 students. This suggests a very high level of drop-out/failure during the previous 3 years.
The post-Jackson environment is now taking its toll.
The number of new student for this year is 20.
Unsurprisingly, ACL Training is projected to start making significant losses over the next few years. It seems unlikely it can possibly continue in its current form.
One of the areas of costs I deal with arises from property damage claims; typically following fire, flood or tree root damage.
Although these claims are usually pursued in the name of the owner of the damaged property, in reality these are subrogated claimed being brought by the insurer of the property owner and seeking to recover the money they have already paid to the property owner to make good the damage done.
Unsurprisingly, the claimants’ insurers tend to instruct the firms of solicitors they already have working relationships with. Many of these claims are brought with the benefit of conditional fee agreements. There is often something rather tricksy about this whole process. These are claims that traditionally would have been resolved between the loss adjusters for the respective insurance companies with no legal costs incurred in the process. Instructing solicitors from the outset simply adds an unnecessary layer of costs to the process.
Nevertheless, given the solicitors instructed are usually insurer panel firms – familiar with the inflated costs claims presented by claimants’ solicitors in personal injury claims – one might hope that they would adopt a more sensible approach when submitting their own costs claims in these property damage claims.
In my experience, insurer panel solicitors are often the guiltiest of submitting grossly inflated, and barely plausible, claims for costs in these property damage cases. I have yet to decide whether this is due to:
- Deliberate dishonesty having found themselves on the end of a positive costs order and therefore trying to milk the other side for whatever they can get away with; or
- Evidence of spectacular inefficiency in the handling of relatively routine claims.
Either way, it does not seem the ideal way to promote the firms in question. If I was an insurer faced with these grossly excessive claims for costs from these firms, I would never dream of placing them on my own panel in the future. I would assume that if they charged me even half as much on a solicitor/own client basis that they would still be overcharging me by at least 100%.
Gordon Exall’s Civil Litigation Brief is simultaneously invaluable reading for all civil litigators and an example of what is currently wrong with the law.
The advent of the interweb, legal blogs and online resources such as BAILII, produces a continuous stream of new “reported” decisions on a daily basis totally unimaginable even 20 years ago.
On an application for relief from sanctions, for example, advocates are rarely content to simply address the court on the wording of the rule and the Mitchell/Denton guidance. The temptation now is for each party to produce a bundle of authorities on the point with each seeking to apply or distinguish the various decisions to the facts of the current case.
The issue of costs budgeting is no exception to the problem of proliferating “authorities”. Gordon Exall has put together an invaluable list of decisions on the issue of costs budgeting. Whether this trend should really be encouraged is, perhaps, a moot point. Nevertheless, in an age where one can virtually guarantee an opponent will seek to produce numerous authorities on any given issue, one must be prepared to fight fire with fire.