Over the weekend, the Guardian published an article titled: “Whiplash: the myth that funds a £20bn gravy train”, challenging the medical basis for such claims and highlighting the fact that in Greece and Lithuania, where there is no expectation of financial gain from whiplash, chronic neck pain following a car crash appears simply not to exist. (Strangely, @ccesstojustice, who are usually so keen to promote whiplash related stories, did not consider this worthy of a retweet.)
In future (subject to something of a surprise at the next election), damages for “whiplash” injuries will be based on injury duration and costs recovery will end. Damages will be:
0–3 months – £225
4–6 months – £450
7–9 months – £765
10–12 months – £1,190
13–15 months – £1,820
16–18 months – £2,660
19–24 months – £3,725
“However, I am struggling to envisage any business model which would allow for a reasonable profit to be made (even by CMCs) where damages for whiplash claims with symptoms of under 12 months are £1,190 or less and the claims are not costs bearing. What % of damages could be taken that would enable a profit to be made but leave enough damages for the claimant to bother with a claim? (The one exception to this is if an AI system could be put together that would fully automate the claims process for claimants, without the need for any human intervention, in exchange for a small cut of the damages.) Either way, massive jobs cuts will follow.”
Having given the matter further thought, I was perhaps being overly pessimistic.
A potential client walks through the door of a solicitor and explains he was recently injured in a road traffic accident. The solicitor explains how the claims process works and informs the client that because damages are calculated based on the actual duration of the injury there is no point in undertaking a medical examination until the symptoms have resolved themselves and the duration can be accurately determined.
The solicitor goes on to explain that damages are now based on a fixed tariff and shows the client the figures:
“For example, if your injuries last 3 months then you will be entitled to £225. But if your injuries last 18 months then you could win … I mean become entitled to recover … £2,660. Let me know when you are feeling better and we can then arrange a medical examination.”
Based on the figures for injuries with a duration in excess of 12 months, it should be possible for a firm of solicitors to make a reasonable profit charging on a straight contingency fee basis.
Whiplash may not be a myth but I rather suspect that minor (ie less than 12 month) injuries will become a thing of the past once these reforms come into force. (We may be leaving the EU but we will become a little bit more like our European neighbours in some ways.) Medical science will recognise all injuries as having a duration of at least 12 months.
Costs budgeting is designed to ensure proportionate costs are incurred by setting budgets at an early stage in the proceedings.
Costs are proportionate if they bear a reasonable relationship to the sums in issue in the proceedings and the other relevant factors set out in CPR 44.3(5).
That being the case, how often do judges, when setting budgets, record in the relevant order the sum they considered to be reasonably in issue? How often are they asked to do so?
If a claim subsequently settles for significantly less than the recorded sum, would this not represent a “good reason” to depart downwards from the budget?
The Costs Lawyer Standards Board has just finished a consultation process on a proposal to allow a new route to qualification as a Costs Lawyer. The CLSB is proposing to introduce a new test which would lead to Costs Lawyer status. The test would be open to anyone who can evidence that they have achieved 10 years of experience in costs law and practice. There would be no requirement for candidates to undertake learning/study as part of the preparation for the new test.
The new test would cover the current Costs Lawyer training syllabus. It is proposed that the test would be via multiple-choice questions (“MCQs”).
The current three-year training course would continue to operate as the entry route for those without 10 years’ experience.
The thinking behind this proposal is entirely sensible. I became a Fellow of the old Association of Law Costs Draftsmen (as it then was) via a one-off examination, rather than through the then existing training course. I was one of the last to take this route as a decision had been taken to remove that option to qualification. I believed that decision was wrong then and the proposal to reintroduce a fast-track route to qualification – so long as sufficiently robust – should be uncontroversial (although no doubt very frustrating for those experienced costs draftsmen who committed to the time and cost of the full training course in recent years in the absence of a fast-track route).
Nevertheless, there are some obvious issues that arise:
- Is a multiple-choice test appropriately robust? When I did the Bar Vocational Course, a number of subjects (such as Civil Procedure) were tested by way of MCQs. These required significant study (or at least a photographic memory) to have any realistic chance of passing. Guesswork was of only limited assistance. For this new test, I can envisage questions such as:
What is the deadline for service of Replies to Points of Dispute?
A within 21 days after being served with the Points of Dispute
B within 21 days of receipt of the Points of Dispute
C no deadline as Replies are optional
D at least 14 days before the date listed for detailed assessment
E at least 21 days before the date listed for detailed assessment
Nevertheless, one would have to recognise that the laws of probability must allow for the occasional possibility of a pass being achieved through nothing but chance, however unlikely.
- Although well designed MCQs should be able to test knowledge of costs law and practice, it does nothing to test the ability to construct an argument or articulate this in writing. A Costs Lawyer’s work can encompass drafting narratives to bills to summarise complex litigation, the (brief) formulation of costs arguments in Points of Dispute and Replies, drafting written advices for clients on complex issues of costs law and drafting Skeleton Arguments. Over the years, I have lost count of the number of apparently well qualified job candidates who have completed law degrees, CPE, BVC/BPTC, LPC, etc but who turn out to be semi-literate and/or innumerate. This is a scandal for other academic institutions but it is not obvious that it needs to be exacerbated by the CLSB conferring Costs Lawyer status on those lacking basic skills in English and arithmetic, let alone lacking the high standards that should be expected. In the absence of an essay based examination (or equivalent), there is no way to judge whether such high standards in English and reasoning are met. Naturally, I leave it to others to decide whether a costs draftsman would survive 10 years in practice without reasonable literacy or numeracy skills.
- Costs Lawyers have rights of audience on costs matters up to, and including, the High Court. How is advocacy competency to be judged by MCQs? I would be tempted to suggest the complete failure in the consultation to even mention advocacy suggests the CLSB does not properly understand the role of Costs Lawyers but for the fact that this appears to be almost exactly the same approach the ALCD (as it was) took to advocacy. When the decision was made to “automatically” upgrade all Associates and Fellows of the ALCD to Costs Lawyer, all that was required was attendance at a two-day (subsequently shortened to one-day) course with no advocacy exercises or assessment. It was plainly wrong then and the CLSB is wrong now if it considers competency in advocacy to be an issue of no relevance when conferring Costs Lawyer status.
I have previously commented on the problems caused by the Precedent R budget discussion report failing to distinguish between incurred and future estimated costs.
This has, in part, now been addressed by the amended Precedent R (available here).
This follows on from the new rules, that came into force on 6 April 2017, making it clear that costs management orders relate to future costs only. The amended form expressly states:
“Note: include only budgeted costs”
Nevertheless, there remain two problems with the amended form:
- It contains a “Pre action costs” phase. Why? Such costs, by their very nature, can never be future budgeted costs.
- CPR 3.15(2)(c) expressly states that when making a costs management order the court will: “record the extent (if any) to which incurred costs are agreed”. That being so, where in the form can one agree incurred costs?
Third time lucky Rules Committee?
One of the ongoing areas of uncertainty post-Jackson is whether additional liabilities should be included (where still recoverable) when considering proportionality.
I am grateful to Andy Ellis for pointing out the comments of the Supreme Court in Times Newspapers Ltd & Ors v Flood & Ors  UKSC 33:
“However, certain changes introduced following Sir Rupert Jackson’s “Review” do apply to defamation and privacy cases. They include more muscular case management by the courts to deal with cases proportionately, costs budgeting and costs management, which involve the parties and the court controlling the level of recoverable costs at the start of the proceedings (see CPR 3.12(1)), costs-capping (by virtue of PD 3F para 1), and new provisions which limit the level of overall recoverable costs to what is proportionate [emphasis added] (pursuant to CPR 44.3(2)(a)).”
This in in the context of the fact that success fees and ATE premiums remain recoverable in defamation cases.
The Supreme Court appears to have proceeded on the basis that proportionality applies to both. It is not clear from the judgment as to what extent argument was heard on this issue and the relevant transitional provisions.
Response received from well-known claimant costs firm:
“We can confirm the fee earner was in fact a Grade D fee earner.
Therefore we have applied more time throughout given the above.”
Any suggestions as to an innocent explanation as what this is intended to mean gratefully received.
Ever increasing court fees are an issue subject to much commentary.
Nevertheless, there are other more subtle ways where the courts are increasing revenue through amendments to the rules concerning fee payment.
Previously, hearing fees were refundable on a sliding scale where a case settled pre-trial:
100% if the court was notified more than 28 days before the hearing
75% if the court was notified between 15 and 28 days before the hearing
50% if the court was notified between 7 and 14 days before the hearing
From 6 March 2017, the Civil Proceedings Fees (Amendment) Order 2016 changed this and the hearing fee is no longer repayable if a matter settles pre-trial. On the plus side, the fee is now payable closer to the trial itself, which may reduce the impact of this change. The new rule does not apply to cases where the court gave notice of a trial date or the start of the trial period before 6 March 2017. So, pay attention to the relevant dates when considering whether a hearing fee is refundable.
Over the years there have been other amendments to increase the overall fees payable. Again, in relation to hearing fees, the rules previously provided that hearing fees were payable only once in the same proceedings. This appears to have been dropped from the rules in 2014 and it is therefore sometimes necessary to pay two sets of fees, such as where a matter is subject to a split trial and a second listing questionnaire is required. From my experience, the courts do not seem to take a particularly consistent approach to this issue.
I recently had to renew our professional indemnity insurance. Our brokers sent us a very lengthy document from our insurers even though we were just looking to renew our policy.
Amongst the various questions asked was: “What does the Proposer think are the more significant potential risks associated with their field of work”.
I completed this section with, what I thought was, the rather obvious: “Providing negligent legal advice”. I did not consider this to be an admission of a risk particular to our firm but simply a recognition of the self-evident main risk any lawyer faces on a day-to-day basis (at least if you do not handle client money); although missing deadlines is perhaps another one.
I was therefore somewhat surprised when our broker returned to us to say the insurer had queried what legal advice we gave as they thought our business was that of costs draftsmen.
Even if you turned the clock back 20 years, where much of the day-to-day work of old-school costs draftsmen was counting letters and estimating how many would be recoverable, the latter task still amounted to legal advice just as much as a solicitor advising a client what damages they might expect to recover in a personal injury claim.
However, for most of the past 20 years a costs draftsman’s job has involved advising on such issues as compliance with the rules and regulations concerning conditional fee agreements, DAB regulations, consumer credit regulations, relief from sanctions applications, etc.
Am I right to be concerned that our insurer is providing professional indemnity insurance for a category of business when they do not seem to know the nature of the work undertaken by such businesses? And, if that is so, how do they set their premiums?
Lord Justice Jackson gave the keynote speech on Tuesday to a packed-out White Paper costs conference (conference to be repeated on 28 March 2017), discussing his current review of an extension of fixed costs.
It will be remembered that Sir Rupert stated in another speech in January 2016, before he was tasked with undertaking this review:
“There should be single fixed costs grid for all multi-track cases up to £250,000.”
It is therefore understandable that there was a certain element of scepticism when he declared, after he had been formally tasked with undertaking this review in November 2016, that:
“I will keep an open mind for the time being about what types and levels of cases should fall within such a regime”
It was therefore interesting to listen to clues as to the extent his views had hardened or softened compared with his original position.
Firstly, there can be no doubt that he will look to extend fixed fees across the fast-track. Sir Rupert has repeatedly stated that the missing piece of his original reforms was the fact this was not done originally.
In terms of impact:
- For low value commercial disputes, claims under £10,000 currently fall into the small claims track. Extending fixed costs into those claims which fall between £10,000 and £25,000 is perhaps not dramatic.
- The two notable areas of personal injury work that currently fall outside fixed costs are noise induced hearing loss claims and holiday claims. In the past, this probably represented on a relatively modest proportion of the costs market. However, given earlier reforms have sucked such a large part of the personal injury market into fixed fees, these probably represent a more significant proportion of the surviving work. Certainly, those costs firms that undertake work in this area will feel the impact and this will inevitably squeeze the profits of those claimant solicitor firms heavily reliant on these areas of work.
Sir Rupert was always of the view that fixed costs, once his initial reforms had bedded-in, should be extended into the “lower reaches of the multi-track”. The most interesting comment of his recent speech was that:
“’lower value’ has different meanings according to context. In the mercantile courts (I am told) ‘lower value’ means claims up to about £250,000. In personal injury litigation, on the other hand, the upper limit for ‘lower value’ claims would be well below that figure.”
If I was a betting man, I would anticipate that he will recommend an extension of fixed fees for personal injury claims valued up to £50,000 (paving the way for further increases at a later date).
He will be significantly fortified in his views by the fact that campaigners against his original proposals for fixed fees argued they would cause significant reductions in claims numbers but this has, as he said, simply not happened. This may explain, in part, why more recent claimant campaigns have also been met by considerable scepticism.
In any event, work volumes for those working in costs will drop further.
Likely implementation date: April or October 2018.
One of the current battlefields in costs is over the issue of whether additional liabilities should be included (where still recoverable) when considering proportionality.
One would have thought this was at least one area where there was no room for dispute as there is an express transitional provision dealing with this issue at CPR 48.1(1):
“The provisions of CPR Parts 43 to 48 relating to funding arrangements, and the attendant provisions of the Costs Practice Direction, will apply in relation to a pre-commencement funding arrangement as they were in force immediately before 1 April 2013, with such modifications (if any) as may be made by a practice direction on or after that date.”
To what extent the current debate is down to poor drafting or the ingenuity of lawyers is a matter I will leave to others.
It is usually a mistake to try to determine the merits of an argument based on the number of people who share it, even to the extent to which they are experts. As matters currently stand, this seems to be a relatively evenly balanced point based on the first instance judgments that are circulating, with the slight edge going in favour of the view that additional liabilities are to be considered separately (or does a Senior Costs Judge count for double?).
Senior Costs Judge Master Gordon-Saker in BNM v MGN Limited  EWHC B13 (Costs):
“When applying the new test of proportionality, the court need not consider the amount of any additional liability separately from the base costs.”
Master Simons in Rezek-Clarke v Moorfields Eye Hospital NHS Foundation Trust  EWHC B5 (Costs):
“the Claimants submit that when looking at the question of proportionality I should look separately at profit costs and additional liabilities. That may well have been the case prior to the 1 April 2013 but in my judgment the position is now different. Costs must include those costs that are claimed in the Bill of Costs that are presented to the Court.”
Master Rowley in King v Basildon & Thurrock University Hospitals NHS Foundation Trust  EWHC B32 (Costs):
“when considering whether the costs in this case were proportionate, the relevant costs to consider … were in my judgment the base costs, exclusive of success fee and ATE premium”
Regional Costs Judge Besford in Mather v Doncaster & Bassetlaw Hospitals NHS Foundation Trust when faced with a bill of costs that straddled the Jackson reforms decided the court should consider both the pre and post April 2013 costs when deciding whether it was proportionate, but ignore any additional liabilities.
Master Brown in Murrells v Cambridge University NHS Foundation Trust:
“In the circumstances I respectfully disagree with the decision of Master Gordon-Saker in BNM as to the application of the new proportionality test to additional liabilities and therefore also as to the need to aggregate base costs with additional liabilities.”
Hopefully, the Court of Appeal will finally resolve this issue in October in the appeal in BNM v MGN Ltd.