Law costs draftsmen, costs lawyers and others working in the field of legal costs are set to have a great 2013.

This may sound counterintuitive given the Jackson costs reforms are being introduced this year but it is worth considering the facts.

Costs budgeting is set to be introduced in April. Overall this is bad news for costs practitioners. Costs budgeting produces a small amount of frontloading of costs work (preparing budgets and seeking the courts’ approval) which is more than offset by the loss of work at the end of the claim (drafting bills, points of dispute and replies, negotiating costs and attending detailed assessment hearings). However, given the life cycle of a typical claim, 2013 is likely to produce the additional work generated by costs budgeting without practitioners experiencing the corresponding loss of work at the end of a claim. Claims subject to costs budgeting are unlikely to settle this year.

Inter partes recoverability of success fees and ATE premiums is due to end in April. This is almost certainly likely to reduce the number of costs dispute. However, the change will not be retrospective and it is unlikely that the negative impact on cost work will therefore be felt this year. Again, the vast majority of claims where this is likely to be relevant will simply not have settled.

The extension of the RTA portal will have a dramatic impact on work volumes. But the news that implementation will not happen in April will again mean that the impact of this change will not be felt in 2013.

The really noteworthy factor to consider is the number of substantive claims that are likely to settle this year. Whereas claimants solicitors immediately see the additional work generated by new claims, those working in costs traditionally have to wait until the conclusion of a matter for it to produce any cost work. Recent years have seen an ever increasing number of new claims being brought. 2013 should see these figures translating into additional costs work.

This combination of factors should see a boom in 2013 for those working in legal costs.

2014 will be crap.

The Association of Costs Lawyers new website (www.associationofcostslawyers.co.uk) is well worth a visit for those who have not yet seen it (and not simply to see a video presentation by Chairman Iain Stark – as if that weren’t enough) but also to see the sample copies of the excellent Costs Lawyer magazine. Although this is one of the great perks of ACL membership, it is surely only a question of time before this publication is made available for purchase by non-Costs Lawyers.

I note a recruitment advertisement in Costs Lawyer magazine from Practico seeking senior costs lawyers who have “Costs Lawyer or higher professional qualifications”.

Anyone fancy providing a hierarchy of legal qualifications?

I mentioned the other day receiving an email from the other side's costs draftsman on 30th March 2012 reading:

“Please can you provide an update on the current position of our clients cost cheque in relation to this matter? Costs were agreed on 23rd March in the amount of £7,000.00 on 14 day payment terms”.

I suggested the other side did not appear to have anything better to do other than sending premature chase-ups.

Much heated commentary on this post followed as to whether the chase-up was a reasonable step or not, with one wag noting that “the ‘issue’ has certainly prompted a lengthier debate than entity regulation of the costs profession did”.

I have a further postscript to add. On 4th April 2012 I received the following email on the same case:

“Please can you urgently provide the current position on our clients costs cheque.

Costs were agreed on 23rd March in the sum of £7,000.00.

Please note receipt of payment is strictly 14 days from when costs were agreed, on day 15 we would be in the position to issue enforcement proceedings to recover the agreed amount.”

Given there was no costs order, they presumably meant they would be in a position to issue proceedings for breach of contract on day 15.

At this stage I went away to review the papers:

8th March 2012 – Defendant makes offer of £7,000

23rd March 2012 – Claimant says they “confirm costs are now agreed in the sum of £7,000. Settlement in the agreed sum is strictly subject to receipt of the payment in satisfaction within 14 days from the sate of this letter”.

I will confess that I rather lost interest in contract law after week one of my law degree and therefore never really mastered much beyond offer, acceptance, rejection and counter-offer. However, my limited understanding of such matters is that if you purport to accept an offer but then seek to impose a fresh condition upon acceptance, such as:

• Payment is made within a certain timescale, or
• Payment is made in used £10 notes left in a paper bag under a park bench, or
• Payment is hand delivered by Pippa Middleton who will then proceed to smear the fee earner in chocolate sauce before licking it all off,

then you have not actually accepted the offer put forward. You have instead made a counter-offer, and thereby rejected the original offer. In this case, the Claimant’s counter-offer of £7,000 subject to payment being made within 14 days was not accepted. Therefore there was no agreement and no breach of any agreement such as to give rise to the right to “issue enforcement proceedings”.

No doubt an offer to settle costs comes with an implied term that payment will be within a reasonable period and failure to pay within a reasonable period would give rise a claim for breach of contact. Whether failure to pay within 14 days can be taken as amounting to a breach of such an implied term is a moot point however given the facts of this case.

The Defendant’s original offer of £7,000 was made “strictly subject to disclosure of an enforceable CFA covering the claims against the [Defendants]”. To date, there has been no such disclosure.

You couldn’t make it up.

Following on from the decision in Kynaston v Carroll [2011] EWHC 2179 there have been calls in certain circles for entity regulation of costs firms. Currently the Costs Lawyer Standards Board (CLSB) regulates only individual Costs Lawyers.

There appear to be a number of arguments being put forward as to why this needs to be done. Today I will focus on one limited aspect. As I understand the argument it goes something like this: Non-qualified costs draftsmen who are employed by a firm of solicitors may attend detailed hearings as they are employees of the firm. Such individuals are regulated indirectly by the SRA as the SRA regulates the firm. The CLSB does not regulate firms. If Costs Lawyers can delegate their rights of audience to non-Costs Lawyers there is no corresponding control over the non-regulated individual. We therefore need to regulate costs firms so all those wishing to exercise the rights given to Costs Lawyers are properly regulated.

This is, in my view, a misreading of the Legal Services Act 2007, which governs rights of audience.

Under the Act, there are two ways (so far as relevant) in which a person can exercise rights of audience.

The first is if they are an authorised person and therefore have the right themselves (eg solicitors, barristers, Costs Lawyers).

The second is where they are an “exempt person” for the purposes of Schedule 3. The relevant section reads:

“The person is exempt if –

(a) the person is an individual whose work includes assisting in the conduct of litigation,

(b) the person is assisting in the conduct of litigation –

(i) under instructions given (either generally or in relation to the proceedings) by an individual to whom sub-paragraph (8) applies, and

(ii) under the supervision of that individual, and

(c) the proceedings are being heard in chambers in the High Court or a county court and are not reserved family proceedings.”

The crucial part to understand is that you are only an “exempt person” if you are instructed and supervised by an individual who is an authorised person (eg a solicitor or Costs Lawyer). There is no right to appear by virtue of being an employee of a firm of solicitors. The Act is not concerned with entities but rather the rights being exercised by individuals.

Therefore, the head of an in-house costs department who is not themselves an authorised person has no “right” to appear at a detailed assessment hearing. They would need to be instructed and “supervised” by a person who was authorised, even if this was actually a junior Costs Lawyer in their costs department.

Equally, a senior litigation executive (who is not otherwise qualified) who heads a large personal injury department in a firm of solicitors has no “right” to attend a routine application being heard in chambers. They would need to be instructed and supervised by an authorised person, even if this was a newly qualified solicitor who works under them.

Again, even in light of Kynaston, an independent law costs draftsman has no “right” to attend a detailed assessment hearing simply because they have been instructed by a firm of solicitors. They need to have been instructed (and “supervised”, whatever that means) by an individual at the firm who is themselves an authorised person.

At this stage it becomes apparent that probably 50% of those who appear at hearings in chambers (including details assessment hearings) have no right to be there because they have not been instructed by an appropriate person, but are relying on the mistaken belief the right comes from being employed by or instructed by a firm of solicitors (that is the real rights of audience "myth"). I won’t even begin to explore the issue of how many would pass a test of whether they were being properly “supervised”.  

However, the point is that Kynaston does not highlight a “problem” of how costs firms are not regulated. The Legal Services Act 2007 is about controlling individuals. When something goes wrong, the buck stops with the authorised individual who gave the instructions. Whether it is the solicitor who instructs an independent law costs draftsman, the solicitor who instructs an in-house costs draftsman or the Costs Lawyer who instructs a costs draftsman in their costs firm, the position is the same. The regulatory body, whether the SRA or CLSB, is there to hold to account those who have not exercised their supervisory duties properly. There is no need for an extra burden of entity regulation to be imposed. Those silly enough to delegate their own rights too freely will lose those rights (assuming the relevant regulatory body is doing its duty).

It is also a mistake to believe that if only individual Costs Lawyers are regulated by the CLSB it prevents any control over who the Costs Lawyer delegates their rights to. There is absolutely nothing to stop, and every reason to encourage, the CLSB from making orders in appropriate cases that prevent Costs Lawyers from instructing a named non-Costs Lawyer in relation to detailed assessment hearings (if it is decided a problem lies with the actions of a non-Costs Lawyer at a detailed assessment hearing). The SRA has similar powers in relation to making orders that no firm of solicitors is to employ named individuals. By this method unregulated individuals fall under the powers of the CLSB in so far as preventing “undesirables” from exercising the rights of audience given to Costs Lawyers.

There is also the danger of making a mountain out of a molehill over this issue. Kynaston appears to have been a case where the costs firm was acting for a party with no solicitor on record. If a solicitor had been on record then, as we now know, the costs draftsman could have been instructed by that solicitor and been an “exempt person”. Once we have fixed fees across the fast-track, are there really going to be many cases where costs draftsmen, or Costs Lawyers, are acting without a solicitor on record? Costs Lawyers’ rights of audience are unlikely to be needed very often in the future (other than some solicitor/own client work and those very few appeals undertaken by Costs Lawyers). For the majority of cases the “right” to appear is the same as has always existed for detailed assessment hearings (being instructed by a solicitor to appear at a hearing being heard in chambers).

There are other arguments for entity regulation which I’ll cover another day.

Costs Lawyer magazine has unsurprisingly been devoting quite a lot of coverage and comment to the case of Kynaston v Carroll [2011] EWHC 2179 (click to read judgment). This concerned the thorny issue of rights of audience at detailed assessment hearings.

The facts of the case, so far as relevant, are that an employee of a costs firms (who was not himself a Costs Lawyer or otherwise had his own rights of audience) was “working under the supervision” of a Costs Lawyer (who therefore did possess rights of audience) and attended a detailed assessment hearing heard in the Senior Courts Costs Office. The question that arose was whether the employee had the right to appear before the court.

Master O’Hare said “yes”. The other side sought leave to appeal, which was refused on paper as being “wholly without merit”. On the further oral application for permission to appeal Mr Justice Burnett again refused permission on the basis that “the arguments have no merit at all”.

In simple terms it was accepted that the employee of the costs firm fell within schedule 3 of the Legal Services Act 2007 and was therefore entitled to appear before the Court.

In the alternative, Master O’Hare had indicated that even if no such automatic right existed, he nevertheless had the power to grant such a right on a discretionary basis and would have done so. Mr Justice Bennett recognised such a power and made no suggestion it would be inappropriate to exercise it in detailed assessment hearings.

So we now know several things:

1. I was correct all along (smug mode) in my interpretation of the relevant act – see previous post on rights of audience.

2. Detailed assessment hearings are heard “in chambers”.

3. The term “in chambers” is not to be treated as meaning “in private”.

4. Costs Lawyers can, where there is proper supervision, delegate rights of audience (in detailed assessment hearings) to a non-Costs Lawyer costs draftsman.

5. There is no reason independent law costs draftsmen (ie non-Costs Lawyers who are not working in-house for a firm of solicitors) cannot appear in detailed assessment hearings where they have been properly instructed by a solicitor.

This decision has produced calls in some circles for entity regulation of costs firms (the firm in Kynaston not being regulated as the Costs Lawyer Standards Board only regulates individuals). I’ll discuss that issue tomorrow.

Why do we get the plural “Lawyers” in “Association of Costs Lawyers” but the singular “Lawyer” in “Costs Lawyer Standards Board? They don’t call it the “Solicitor Regulation Authority”.

And surely there should be an apostrophe in there somewhere. Should it not be: “Costs Lawyers’ Standards Board”?

This is the kind of stuff that keeps me awake at night worrying.

Last year, much to my surprise (and no doubt the equal horror of many others), I was elected to the Council of the Association of Costs Lawyers.

The experience has been a fascinating and informative one, in no small part due to the fact that during this period the Council has been going through a fundamental change. Previously the ACL was a regulatory body. Now that task has been mainly transferred to the Costs Lawyer Standards Board with the ACL Council’s role now principally being that of a representative body.

These changes raise a number of interesting issues but do mean that the role of the Council is no longer the same as the Council to which I was elected. Further, as those who followed the previous election process will remember, I stood on rather a specific manifesto of reform. Having found myself elected in a minority of one on certain of those issues, it was inevitable the Council would continue in the same direction as before.

Having now served on the Council for a year I have therefore decided to stand down.

Whatever differences of opinion I may have had over certain decisions made over the past year, it has been a pleasure to work with the rest of the Council. I managed to escape very lightly, but the extraordinary amount of time and commitment that many of the other Council members have put in over the past year to ensure the smooth running of the Association and fulfil the requirements of the Legal Services Act is something of which most members will have absolutely had no idea.

In light of the new role of the ACL Council, a consultation document has been sent to ACL members proposing some very sensible changes to the structure of the Council.

Whatever, the future look of the Council, I wish it all the best for the future.

Congratulations to Andrew Post and Alexander Hutton on their appointment as Queen's Counsel.

It appears that eligibility for QC status is limited to practising barristers or practising solicitors who hold higher court rights of audience.

No scope for Costs Lawyers to apply.

Something for the Costs Lawyer Standards Board to look into?

Some people are "glass half full" types.  Some people are "glass half empty" types. Some people are "who nicked my bloody glass" types.  

Forget for the moment the other Jackson proposals and what impact they may have and just look at two forthcoming changes to the Costs Practice Direction:

• An end to lengthy points of dispute
• An almost complete end to replies

Then add in Jackson’s green light to rolling out provisional assessments across the country, effectively ending detailed assessment hearings for bills under £25,000.

This is before we even start to get to the heart of the Jackson reforms.

Death by a thousand cuts for many working in legal costs?

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