Predictions for 2016

Costs Lawyer magazine recently published the predictions for 2016 of the great and the good in the profession. They also asked me. This was my contribution, written before Lord Justice Jackson’s latest speech:

“When I was asked this question last year, my prediction was that 2015 would be the year guidance would be given by the Court of Appeal on the new proportionality test.  However, at the time of writing, we still have nothing from the High Court or above as to how proportionality is to be applied as part of the detailed assessment process.  I was clearly wrong in my timings and can only hope we have something in 2016.  I also repeat my previous prediction that what will ultimately emerge will be a fiasco and nothing close to what Lord Justice Jackson envisaged.

I also predicted that there would be calls for a massive extension of fixed fees as a consequence of the mess being made of Jackson implementation.  Such calls have indeed been made (with proposals for fixed fees in clinical negligence cases and noise induced hearing loss cases amongst other things).  Expect much more of the same in 2016.

This will be the year where the judiciary finally properly grasps the fundamentals of costs budgeting with sensible and consistent decisions being made at all levels.  Resistance to costs budgeting will be overcome and all legal practitioners will acknowledge budgeting to be a useful tool to control disproportionate costs.  Possibly…”

Signature to a Bill of Costs

In Mansion Estates Ltd -v- Hayre & Co (A Firm) [2016] EWHC 96 (Ch) His Honour Judge Saffman commented:

“in my view it would be wrong to assume that it is inherently more improbable that a professional person will be dishonest than anyone else. If ever such a view validly had traction, I do not think it can do so in the modern world.”

Although not a decision relating to costs, this must have equal applicability to the signature of accuracy to a bill of costs. There may once have been a stage when “the Court can (and should unless there is evidence to the contrary) assume that his signature to the bill of costs shows that the indemnity principle has not been offended” (Bailey v IBC Vehicles Ltd [1998] EWCA Civ 566) but the world has now moved on from such innocent days.

Jackson is dead. Long live Jackson.

Lord Justice Jackson has repeated his calls for an extension of fixed costs, this time with a recommendation it should apply to all claims with a value up to £250,000 and also produced a proposed matrix of the fixed costs that should be payable.

One of the reasons advanced in favour of an extension of fixed costs is:

“My impression is that the profession is now more willing to accept fixed costs than it was in the past. This is for two main reasons. First, such a regime would dispense with the need for costs budgeting, which not everyone enjoys.”

It is not entirely clear whether the irony is lost on Jackson LJ of justifying fixed fees as a way to avoid unpopular costs budgeting when costs budgeting one of the key Jackson reforms.

The ultimate irony is where this suggestion leaves the bulk of the Jackson reforms. Those reforms introduced a number of controversial measures (eg an end to recoverability of additional liabilities, Qualified One-Way Costs Shifting) and convoluted measures (eg costs budgeting, Qualified One-Way Costs Shifting (again)), in a report running to 557 pages, in an attempt to achieve proportionality (all at considerable disruption to lawyers and the courts in the implementation). A massive extension of fixed fees would make the majority of the Jackson reforms entirely redundant for the majority of cases (no costs budgeting, costs management, provisional assessment, new bill of costs, etc). Fixed fees across the board was always an easier (if not necessarily better) way to ensure proportionality than the bulk of the previous reforms already introduced.

Jackson LJ recommends that, at least initially, fixed fees are introduced for all claims up to £250,000:

“The first question is whether we should be fixing costs for all civil cases (like Germany and New Zealand) or just for the fast track and the lower reaches of the multi-track. This is a policy decision for others. I would favour the latter course (as recommended in my Final Report), but I acknowledge that some favour the former course. There are two particular reasons why I favour adopting the latter course: (i) Switching to a totally fixed costs regime for all claims, however large, would be too great a change for the profession to accept, certainly in the short term. The justice system only functions because of the high level of support which the profession provides.”

This is the first suggestion I have heard that any element of the Jackson reforms was ever meant to please the legal profession. It is difficult to believe that the final report would have remotely resembled its final form if that was what was intended. Secondly, if a proposal to extend fixed fees is now intended to attract a high level of support amongst the profession, surely this is being looked at the wrong way around. Fixed fees for all civil claims up to £250,000 will impact on the vast majority of claims, the vast majority of litigants and a huge proportion of the legal profession. Conversely, excluding claims above £250,000 will impact on a relatively small number of litigants and a small proportion of the legal profession. Not switching to a totally fixed costs regime for all claim will not lessen the impact for the profession as a whole, it will simply mean that the impact falls almost entirely on large parts of the legal profession whilst leaving other smaller parts almost entirely unaffected.

Surely it would make more sense to pilot an extension of fixed fees for cases worth over £250,000 only. We have repeatedly been told that City firms are much more experienced in providing their client with clear budgets and that legal costs are less of a concern for commercial litigators. If a pilot is a success, we can then extend it downwards.

Fixed costs uncertainty

I previously mentioned that the conflict in decisions as to whether fixed costs apply where costs are payable on the indemnity basis, when a claimant succeeds on a Part 36 offer, was due to be resolved by the Court of Appeal in February.

Kerry Underwood’s blog now reports that this case has settled. We are therefore left in the dark as to when fixed costs do or do not apply.

Hopefully this is a matter the rules committee will address as a matter of urgency. Given the benefit of certainty and the avoidance of further satellite litigation are lost if fixed costs do not apply, surely the answer would be to continue to apply fixed costs but with an uplift, say 10%, on the amount. This leaves all the benefits of fixed costs but with a costs incentive retained to the claimant to make a good Part 36.

Further delay to new Bill of Costs format

The mandatory pilot scheme in the Senior Courts Costs Office for the new J-Codes based bill of costs format had been due to start in April but was then delayed until October 2016. It has now been announced that this date has also been abandoned for further consideration.

Part of the impetus for this appears to have come from the Law Society who wish to consult with their members. (The Law Society can hardly be blamed for this. Jackson only recommended a new software based bill of costs in December 2009 and so this will have come as quite a surprise to them.)

For the time being, we are left with a continuing potential gap between budgeted cases and bills of costs that do not properly reflect those budget phases. The recent “summary by phase” requirement is wholly inadequate as an interim measure.

The conspiracy to make the Jackson reforms unworkable continues.

Fixed costs when costs on indemnity basis

Do fixed costs continue to apply if a claimant is entitled to costs on the indemnity basis? I am grateful to Gordon Exall’s Civil Litigation Brief for highlighting two conflicting decisions on this issue. This is now apparently due to be heard by the Court of Appeal in February.

Something has gone seriously wrong with the drafting of the rules that it can be anything other than 100% clear as to when fixed costs applies. It makes a mockery of the certainty that such a regime is designed to create.

How detailed should Points of Dispute be?

I am always rather mystified when I receive Replies that contain a preamble along the following lines:

“Many of the Defendant’s points of dispute do not comply with the costs practice direction as they do not state concisely (or at all in some cases) the nature and grounds of the dispute. The Defendant has chosen, in many cases, to either offer no reason for the proposed reduction or just state that the claim is ‘excessive’.

CPR Part 47.9 CPD 8.2(d) states -

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 the Practice Direction, so far as practicable.

They must -

(b) identify specific points, stating concisely the nature and grounds of dispute.

The Claimant submits that where the Defendant has failed to state the nature and
grounds of their dispute then that dispute should be struck out and the item(s) allowed in full.”

If I understand the point being taken, it is being suggested that a Dispute that simply states the number of communications claimed, hourly rate, disbursement, time claimed, etc, is “excessive” without further detail or explanation is non-compliant with the Practice Direction.

Now, it is no doubt possible that where, for example, 10 routine communications are being claimed to obtain a single set of GP records that instead of a dispute reading: “Excessive. Reduce to 3”, this could be elaborated on:

“The Defendant respectively submits that the 10 routine communications claimed to obtain a single set of medical records is unreasonably high and disproportionate and that a competent litigator acting with all due skill and alacrity should have been able to obtain the same without the need to undertake this level of communications. To the extent to which this level of communications has been undertaken, this implies a number of chase-up communications (responsibility for which should not fall on the shoulders of the paying party on an inter partes assessment) or are of a non-fee earner, purely administrative nature. The Defendant submits a reasonable allowance would be 3 routine communications. The Court is reminded that this is a standard basis assessment and by virtue of CPR 44.3(2)(b) when assessing costs the Court will ‘resolve any doubt which it may have as to whether costs were reasonably and proportionately incurred or were reasonable and proportionate in amount in favour of the paying party’.”

However, I am not sure that (other than length and cost) this adds anything to the substance of the dispute.

Nevertheless, that may just be my view of the matter. What I really struggle with is the suggestion that the shortened dispute is non-compliant with the Practice Direction, particularly where the receiving party’s Replies themselves expressly make reference to the requirement that Points of Dispute “must follow Precedent G in the Schedule of Costs Precedents annexed to the Practice Direction, so far as practicable”. I can only conclude that those who churn out these kind of Replies have never taken the time to read Precedent G.

Here it is: Precedent G.

And here are some of the example “model” disputes:

  • “Rates claimed for the assistant solicitor and other fee earners are excessive. Reduce to £158 and £116 respectively plus VAT.”
  • “The number of conferences with counsel is excessive and should be reduced to 3 in total (9 hours).”
  • “The claim for timed attendances on claimant (schedule 1) is excessive. Reduce to 4 hours.”
  • “The total claim for work done on documents by the assistant solicitor is excessive. A reasonable allowance in respect of documents concerning court and counsel is 8 hours, for documents concerning witnesses and the expert witness 6.5 hours, for work done on arithmetic 2.25 hours and for other documents 5.5 hours. Reduce to 22.25 hours.”
  • “The time claimed for preparing and checking the bill is excessive. Reduce solicitor’s time to 0.5 hours and reduce the costs draftsman’s time to three hours.”

What is good enough for Precedent G is good enough for me (and the Courts).

When should interest run on costs?

Interest on costs usually runs from the date of the order for costs. CPR 47.7 provides that detailed assessment proceedings should be commenced within 3 months of the final order/judgment.

CPR 47.8 provides that where a receiving party fails to commence detailed assessment proceedings within the period specified, the paying party may apply for an order requiring the receiving party to commence detailed assessment proceedings within such time as the court may specify. By virtue of CPR 47.8 (3), if the paying party has not made such an application and the receiving party commences detailed assessment proceedings late, the court may disallow all or part of the interest otherwise payable to the receiving party but will not impose any other sanction.

I would suggest it has therefore been generally accepted that a receiving party will have a three month period to commence detailed assessment proceedings and will recover interest for that three month period in any event. If they commence detailed assessment proceedings after three months, the court may will disallow interest for the period of any subsequent delay.

Given interest currently runs at 8%, for firms with a good cash-flow there is a positive incentive to delay commencement until the end of the three month period and it is certainly common to see some firms delay until very close to the three month period before providing details of their costs.

The decision of Mr Justice Leggatt in Involnert Management Inc v Aprilgrange Limited & Ors [2015] EWHC 2834 (Comm) is therefore a potentially important development. As with all such decisions, the full judgment should be read to properly appreciate the reasoning and specific facts of the case but, in essence, he held that it would be unreasonable to order interest to run until the paying party knows what costs are being claimed and has had a reasonable opportunity to consider what sums are properly payable. He therefore ruled that interest should start to run from three months after the order for costs.

In summary:

“it seems to me that a reasonable objective benchmark to take is the period prescribed by the rules of court for commencing detailed assessment proceedings. Pursuant to CPR 47.7, where an order is made for payment of costs which are to be the subject of a detailed assessment if not agreed, the time by which detailed assessment proceedings must be commenced (unless otherwise agreed or ordered) is three months after the date of the costs order. In order to commence such proceedings, the receiving party must serve on the paying party a bill of costs giving particulars of the costs claimed. It is then for the paying party to decide which items in the bill of costs it wishes to dispute. Postponing the date from which Judgments Act interest begins to run by three months will therefore generally serve to ensure that the party liable for costs has received the information needed to make a realistic assessment of the amount of its liability before it begins to incur interest at the rate applicable to judgment debts for failing to pay that amount.”

It will be interesting to see whether this becomes the new “norm”.

Christmas Cocktail

My recommended cocktail for the holiday season is a variation of the Boulevardier cocktail from Harry McElhone’s 1927 book Barflies and Cocktails. (Not this didn’t stop Nigella Lawson appearing to take credit for inventing the same in her recent Christmas TV special and renaming it the Kansas City Christmas).

My variation adds mulling syrup to give it a real Christmassy feel.

1. Take one and a half measures of bourbon, one measure of Campari, one measure of sweet (rosso) vermouth and half a measure of mulling syrup.
2. Stir with ice and strain into a chilled martini glass.
3. Drink.
4. Repeat as necessary.

I think I’ll call it the Winter Jackson Special.