Legal Cost Specialists

Posts made in May, 2010

VAT – Yet again

By on May 27, 2010 | 8 comments

My post on Tuesday, concerning the change in VAT rates, confirmed two things.  Firstly, how mind numbingly boring a topic it is.  Secondly, how much difficulty this is causing law costs draftsmen, solicitors and others.  The number of comments, both on the Legal Costs Blog and in emails I received, indicates that some readers are still not convinced by the analysis I gave.  Whether dealing with a high value claim or large volumes of low value claims, this extra 2.5% is important.  I will therefore make one final attempt to set out the basic position as I understand it and hope never to have to write on the subject again.  I am going to make one important assumption here (and readers may think this is sensible or not), namely, that the Law society and Bar Council have got the basic position right.  I think the problem that many have with this issue is getting themselves bogged down in worrying over issues concerning the “basic” tax point and “actual” tax point.  These issues are no doubt important under ordinary circumstances, but a change in VAT rates results, at least on this occasion, in special “change of rate rules”.  This is the important issue to understand.  The Law Society Practice Note is clear on this:  “Under the normal rules, standard rated supplies with tax points created by payments received or VAT invoices issued on or after 01 January 2010 will be liable to the 17.5 per cent rate. However, there are optional change of rate rules that you may wish to apply:  Where you issue a VAT invoice or receive a payment on or after 01 January 2010 for work that was completed before 01 January 2010 you may account for VAT at 15 per cent. Where work commenced before 01 January 2010 but will not be completed until on or after 01 January you can apportion the supply between that liable to 15 per cent and that liable to 17.5 per cent.”  Therefore, for a typical CFA funded case, with no interim invoices, you can charge VAT at 15% for the work done during the period the rate was 15%.    The Bar Council has issued a Guide for barristers...

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VAT – Again

By on May 25, 2010 | 12 comments

I previously tried to give a simple summary of the impact of the recent VAT change in an earlier post. However, a regular reader of the Legal Costs Blog recently got in touch asking me to mention this issue again. As my patience is slowly disappearing over the number of defective bills of costs I keep seeing, I will oblige. CPD 4.2(4) reads: “Where value added tax (VAT) is claimed and there was a change in the rate of VAT during the course of the proceedings, the bill must be divided into separate parts so as to distinguish between; (a) costs claimed at the old rate of VAT; and (b) costs claimed at the new rate of VAT.” CPD 5.9 mirrors this: “All bills of costs, fees and disbursements on which VAT is included must be divided into separate parts so as to show work done before, on and after the date or dates from which any change in the rate of VAT takes effect.” You will note these are mandatory requirements. If you prepare your bill in one part, where the work covers a change in VAT rate, the bill is defective. The CPD deals with what rate should be claimed in more detail: “5.7 Where there is a change in the rate of VAT, suppliers of goods and services are entitled by ss.88 (1) and 88(2) of the VAT Act 1994 in most circumstances to elect whether the new or the old rate of VAT should apply to a supply where the basic and actual tax points span a period during which there has been a change in VAT rates. 5.8 It will be assumed, unless a contrary indication is given in writing, that an election to take advantage of the provisions mentioned in paragraph 5.7 above and to charge VAT at the lower rate has been made. In any case in which an election to charge at the lower rate is not made, such a decision must be justified to the court assessing the costs.” This means that if a receiving party can take advantage of the lower rate then that is what they should do. The Law Society has issued a detailed Practice Note on...

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Compensation culture – Recount demanded

By on May 24, 2010 | 0 comments

The Legal Service Board’s recent report into referral fees revealed some interesting statistics. It showed that the number of personal injury claims arising from RTAs has risen from the year 2000 to 2009 (see Figure 21 on page 96). This is despite the number RTA accidents involving personal injuries having decreased (see Figure 16 on page 83). “In contrast to the decline of RTAs and RTA injuries, motor personal injury claims have been increasing from 400,000 in 2000-01 to 625,000 in 2008-09.” The report concluded that: “Overall therefore there is evidence that referral fees have facilitated a growth in the number of motor claims as individuals make claims that would not otherwise have arisen.” On the other hand, there had been no corresponding increase in EL claims during the same period. The report commented on this apparent anomaly in this way: “there is no evidence of a trend in the level of referral fees (or their equivalent) among trade unions, hence we would not necessarily expect to see an increase in the number of employer liability claims. Indeed, interviewees believed that the employer liability area was not facing a similar trend to the RTA sector because the employer liability sector had not seen as great an increase in marketing activity that had occurred in the RTA sector. Interviewees indicated that the increase in the number of claims in recent years was related to the economic cycle rather than referral fees.” None of this seems a particularly convincing explanation for the lack of an increase in EL claims, with the possible exception of the economic cycle. It’s hard to have an accident in a factory when we don’t have any left in this country. The report firstly seems to assume that EL referrals come mainly from trade unions. Although these are naturally significant, only a minority of employees are members of trade unions. Secondly, whenever I see a claims management company advertisement on television it is almost invariably focused on EL/trippers/slippers claims rather than RTA claims. I have seen very little indication of an increase in RTA marketing for claims in recent years, although I recognise that does not exactly amount to a comprehensive review of the subject. However, assuming...

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Recoverability of costs of funding

By on May 21, 2010 | 1 comment

A regular reader of the Legal Costs Blog recently got in touch to ask whether the decision in National Westminster Bank v Kotonou [2009] EWHC 3309 (Ch) was a useful one when challenging the costs associated with the funding of a claim. Before turning to the case itself, it is useful to remind ourselves of the case law surrounding this area. Dr Mark Friston’s definitive new work, Civil Costs: Law and Practice summarises the position in this way: “There is no binding authority on the recoverability of the costs of funding advice; there is a significant divergence of judicial opinion on the topic”. The starting point is perhaps the decision of Master Hurst in Claims Direct Test Cases [2002] EWHC 9002 (Costs): “It has long been held that the cost of funding litigation is not a recoverable cost as between the parties: ‘… by established practice and custom funding costs have never been included in the category of expenses, costs or disbursements envisaged by the statute or RSC Order 62. To include them would constitute an extension of the existing category of “legal costs” which is not under the prevailing circumstances warranted.’ (per Lord Justice Purchas, Hunt v R M Douglas (Roofing) Ltd, 18 November 1987, CA, unreported. This point was not taken in the subsequent House of Lords Appeal.) It follows from this that the only costs of funding litigation which are recoverable are those permitted by statute, in this case Section 29 of the Access to Justice Act 1999. Section 29 is specific and has been interpreted by the Court of Appeal in Callery v Gray. Anything falling outside the scope of the Section is not recoverable.” Master Seager-Berry in Ghannouchi v Houni Ltd (SCCO, 12 January 2004) allowed the costs associated with funding and this case is routinely relied on by receiving parties: “the work of providing detailed advice and drafting the CFA and the risk assessment and making enquiries about insurance are recoverable.” I’m sure I have seen a copy of this judgment at some stage but it is not available through any of the normal sources. His Honour Judge Cockcroft, in the case of Masters v Hewden Stuart Heavy Lifting Ltd (Leeds Civil Hearing...

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Specialist costs counsel

By on May 21, 2010 | 0 comments

A further definition from The (Alternative) Legal Costs Dictionary: Specialist costs counsel n. counsel who was once given a brief by his clerk at 7.30pm to appear in Taunton County Court at 10.00am the next morning in relation to the detailed assessment of a bill of costs totalling £3,241.14 but received a text message at 8.30am on the day of the hearing (3 hours into his journey to court) informing him that the matter had been compromised at...

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