The majority of industry news concerning the costs profession comes from the pages of Costs Lawyer magazine and the Association of Costs Lawyers’ regular email bulletins.
Reading these gives the impression of a profession in glowing good health with announcements of firms opening new offices and regularly taking on new staff and recruiting key personnel.
It is understandable that costs firms wish to promote their good news stories.
It is therefore something of a change to see the Law Society Gazette announce a prominent costs firm with apparent cash-flow issues and the fact they have recently closed two of their four offices and reduced their headcount from 110 to 70.
This is hardly unique and the last year or two has seen a number of firms close offices, costs teams being disbanded and redundancies made. There has also been an increasing number of mergers and takeovers. One suspects a large number of these mergers/takeovers have been driven by the need to survive as opposed to being positive attempts to expand.
It is not clear to what extent this is hitting the pockets of individual costs lawyers or law costs draftsmen, although it will clearly be impacting on many who own their own costs firm. Given much of the reduction in workloads will have been from increases in low-value claims attracting fixed fees, one would expect these changes to have been initially felt by those less skilled costs workers who were probably the first to be let go. On the other hand, one reader recently suggested to me that the number of advertisements appearing in Costs Lawyer magazine for experienced costs lawyers (with corresponding salaries) has been declining and those jobs still being advertised are for more junior staff.
I wonder whether any of those who confidently predicted Jackson was nothing to worry about and suggested it would bring wonderful new opportunities are now starting to re-evaluate matters.
Traditionally, the law has avoided applying hindsight when assessing the reasonableness of legal costs that have been incurred.
However, when dealing with the issue of proportionality, hindsight has had a tendency to creep in. If a matter settles for, say, £100,000, the issue of proportionality at detailed assessment has tended to be viewed in light of the damages actually recovered. Many would argue, correctly, that this was the wrong approach. This is because of the Court of Appeal’s comments 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”
Since that decision in 2002, I am unaware of any detailed examination by the courts of what this actually means. This is odd because although a cursory consideration of the words used suggests this is no more than a restating on the traditional approach of not applying hindsight, even a moments proper thought reveals this passage to be so ambiguously worded as to be virtually meaningless.
Taking matters in turn, proportionality is to be judged by what it was reasonable for “him” to believe might be recovered. To whom does “him” refer? The claimant? Most claimants will have no knowledge of what a claim is actually worth or what they may recover, other than what they are told by their legal advisers. This is therefore presumably meant to mean what the claimant reasonably believes based on what his solicitor reasonably informed him the claim to be worth. But what of a case where the solicitor forms one view as to quantum but obtains an advice from counsel which gives a different figure? And what if counsel gives one advice but leading counsel is then instructed who gives another figure? Which of the various figures is to be used?
Secondly, what on earth does “might” mean in the phrase “might recover”? If I buy a lottery ticket, I might win the jackpot. Is it not reasonable to believe this “might” be the outcome even if it is spectacularly unlikely? Depending on what medical evidence subsequently emerges, and how well a claimant recovers from the initial injuries, the same claim “might” settle for anything from £100,000 to £5,000. Which end of that spectrum should be used when considering “might”? Is “might” to be interpreted as “possibly might”, “probably will”, “on balance will” or something else?
To top off one of the most carelessly worded sentences to appear in a modern judgment, what does “at the time he made his claim” mean? Is this at the time a letter of claim is sent, when there may be no medical evidence available and no real basis for forming a view on quantum? Is the claim “made” when proceedings are issued, when there may be medical evidence but it may be incomplete? The reality, of course, is that the value of a claim is potentially in a state of constant flux. Medical evidence will change, new evidence will emerge, an injured party’s condition may unexpectedly improve or deteriorate. It would be wholly unrealistic to fix the notional value of what a claim “might” be worth at some arbitrary point in time and for this to dictate the issue of proportionality regardless of future developments. In reality, if hindsight is not to be used, a judge on detailed assessment would have to undertake multiple retrospectives assessments of what it was or was not reasonable to believe the likely value of the claim was at any given point in time and then apply different figures at multiple different stages when considering what work was proportionate at that point. Perhaps it is unsurprising that most assessments under the old test simply focused on the level of damages actually recovered.
Watching the implementation process of the Jackson reforms has often been like witnessing a slow-motion car crash. It has certainly been in slow-motion, with his original report being published all the way back in May 2009 and his final report being published in December 2009, but with elements still to be introduced and practitioners and the courts still grappling with the basics of those already with us.
The interesting thing about all this has been that much of the undermining of the reforms has come not, as might have been expected, from a reluctant legal profession. Most problems have come from the judiciary.
Costs budgeting is an obvious example, with some sections of the judiciary trying to avoid the process entirely, others, at least initially, wrongly treating the exercise as mini-detailed assessments, others postponing the costs management process to such a late stage in the litigation that it has become irrelevant.
The latest example, I would suggest, is the decision by Regional Costs Judge Lumb in Merrix v Heart of England NHS Foundation Trust (Birmingham, 13/10/16).
The issue was summarised as:
“In summary, the Claimant receiving party submits that if her costs are claimed at or less than the figure approved or agreed for that phase of the budget then they should be assessed as claimed without further consideration. The budget fixes the amount of costs recoverable and the costs can only be reduced if the Defendant paying party satisfies an evidential burden that there is a good reason to depart from the figure in the budget. The Defendant paying party’s position is that the Costs Judge’s powers and discretion are not fettered by the budgeted figure for the phase but that the budget is but one factor to be considered in determining reasonable and proportionate costs on assessment.”
The “problem” that arises stems from the, apparently, clear wording of CPR 3.18:
“In any case where a costs management order has been made, when assessing costs on the standard basis, the Court will –
a. have regard to the receiving party’s last approved or agreed budget for each phase of the proceedings; and
b. not depart from such approved or agreed budget unless satisfied that there is good reason to do so.”
As always, the full judgment is essential reading to understand the decision reached. However, I hope I am not doing a disservice to the carefully reasoned judgment by suggesting in can be summarised as follows: A costs budget provides a cap as to the recoverable costs unless there is a good reason to allow a higher figure. To the extent to which a receiving party has incurred costs within that budget, everything is open to challenge in the normal way.
So how might this work in practice? A successful party has an approved budget of £80,000. They incur costs of £100,000. In the absence of a “good reason”, the costs will be capped at £80,000. However, the paying party is free to challenge the costs claimed in the conventional way. The £100,000 bill is reduced by a typical one-third to around £67,000. So, despite having an approved budget of £80,000, and incurring costs in excess of this amount, the receiving party’s costs are reduced to significantly below that budgeted figure.
It is difficult to see how this approach, if correct, is going to deliver the costs certainty to litigants that costs budgeting was intended to or how this will meaningfully reduce the number of detailed assessments.
And Lord Justice Jackson quietly wept.
During the heyday of the costs negotiating industry, the Association of Law Costs Draftsmen, as it was, held discussions with a number of the major costs negotiating firms to explore the idea of employees of those firms joining the Association. This was back at the height of the costs wars and before the introduction of the predicable costs regime when that part of “industry” was at its peak. The Association had a chance to become truly representative of a far larger proportion of the costs profession/industry than it then was. (At a rough estimate, it represented less than 10% of those working in costs.) I attended a joint meeting with other costs firm and representatives from the Association as I was, at the time, a senior manager with one of the major costs negotiating firms. Although the discussions were positive, nothing further happened.
When the issue was subsequently resurrected, I wrote to the Association and the letter was subsequently published in the ALCD Journal (see letter). This is all the way back in June 2003. In the event, the Association decided to maintain membership requirements and continued to limit membership to traditional law costs draftsmen.
Close observers of almost any organisation will notice the same debates are endlessly repeated every few years. (Back in 2011 I stood for election to the ACL Council with a manifesto including: “Make membership of the association something that all costs professionals aspire to and so increase our membership”.)
The latest issue of Costs Lawyer magazine includes the following from ACL Chairman Iain Stark:
“your elected members of Council, after a period of reflection, have determined that the Association as it currently stands is not in a position to respond to members’ needs going forward. The brief for the future must be to grow the membership and represent all those at the coal face of legal costs, funding and management, while not diluting the hard work undertaken to date to secure a regulated community.”
Here we are again, although against a very different background and outlook.
Growing the membership to represent a broader proportion of those working in the costs world is a very sound proposal. Indeed, it may be the only way for the ACL to survive if there is a major extension of fixed fees.
Nevertheless, I wonder if this particular ship has already sailed. Back in the day, the ALCD/ACL could have become a truly representative body of a large and thriving costs community and been an important lobbying body. Times have now moved on and even if it were possible for the ACL to sign up overnight all those working in costs and related areas (possibly expanding membership ten-fold or more) I doubt the ACL would be able to meaningfully influence the current direction of events. The Association of Personal Injury Lawyers has a membership of 3,800 but failed to stop the changes to recoverability of additional liabilities and will be equally ignored when it comes to the issue of whiplash reform and extension to fixed fees (however comprehensively its views are recorded by the powers that be).
“May you live in interesting times” – Ancient Chinese curse
Lord Justice Jackson has been appointed to look at options to extend fixed recoverable costs much more widely. He has until 31 July 2017 to complete the review. The review has been agreed with the government “and will inform its public consultation on proposed reforms, which will follow the review after consideration of its recommendations”. He will formally commence his review in January 2017, but is inviting written submissions on this topic immediately.
The terms of reference are “to develop proposals for extending the present civil fixed recoverable costs regime in England and Wales so as to make the costs of going to court more certain, transparent and proportionate for litigants” and “to consider the types and areas of litigation in which such costs should be extended, and the value of claims to which such a regime should apply”.
In separate news, the Ministry of Justice has announced it is to press ahead with radical personal injury reforms aimed at curbing a “rampant compensation culture”. Options being considered include:
- Scraping the right to compensation, or capping the recoverable amount, for minor whiplash injuries;
- Introducing a transparent tariff system of compensation payments for claims with more significant injuries;
- Raising the limit for cases in the small claims court for all personal injury claims from £1,000 to £5,000; and
- Banning offers to settle claims without medical evidence. All claims would need a report from a MedCo-accredited medical expert before any pay-out.
The consultation will run until 6 January 2017.
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  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  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.
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.
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.
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.
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  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.”