Legal Cost Specialists

Jackson implementation

By on Oct 9, 2012 | 10 comments

The Government has been releasing further details as to how the Jackson forms are to be implemented.

In relation to the 25% cap on success fees in personal injury cases, excluding damages for future care and loss, this 25% includes solicitors’ success fee, any barristers’ success fee and VAT. Imagine trying to split that particular pie between the solicitor, junior counsel and senior counsel (not to mention what would happen where there is a change in the firm of solicitors acting or a change in counsel).

The lawyer will be required to provide clear information to the claimant on how the success fee has been calculated including showing the breakdown between solicitor and barrister (if appropriate), and the type of damages that the cap applies to (excluding future care and loss). This will be a new requirement for both CFAs and damages-based agreements (DBAs). That should be fun where settlement is reached on a global basis.

In relation to damages-based agreements (DBAs), it has been announced that in addition to the 25% cap on the amount of damages, excluding damages for future care and loss, in personal injury cases that we already knew about, and the existing 35% cap on damages in employment tribunal cases, there will also be a cap of 50% on damages for all other cases under a DBA in civil litigation.

It has been confirmed there will be a new rule on proportionality; the test is intended to control the costs of activity that is clearly disproportionate to the value, complexity and importance of the claim. This will come into effect on 1 April 2013. Of course, it won’t be until at least 12 months after that date that we will have the faintest idea as to how this test will work in practice. 12 months of absolute pandemonium in the costs world with probably not a single case capable of settlement.

The extension of the RTA portal upwards to £25,000 and outwards to cover EL and PL cases appears to still be firmly on the agenda, although the rumours circulating on this issue seem to change by the day.

The Government is still considering whether to increase the small claims limit for personal injury cases from £1k to £5k.

    10 Comments

  1. Simon is right to highlight to issue of how the spilt is to be determined between solicitor and counsel. The Bar Council is in the process of developing a suite of model agreements that will expressly set out how the monies are to be apportioned, not only in terms of the success fee, but also in terms of partial recovery of all of the other costs. It is part of the “transparency principle”, this being one of principles that barristers will be encouraged to apply when agreeing fees. I am – as the chair of the committee that is responsible for drafting those agreements – able to say that even the most seemingly simple methods of apportionment are going to be fearsomely difficult to apply in practice.

    Paying parties will, no doubt, take full advantage of the fact that there is likely to be tension between the receiving parties’ lawyers; in particular, I can see that it is possible that it will become commonplace for offers to be made that will specify the amounts for each lawyer. The new model agreements will address that issue but other agreements may not.

    Enterprising costs draftsman may want to consider offering their services to counsel’s chambers as I doubt if many chambers will have the facilities to carry out the type of investigation that may be required in larger cases.

    Mark Friston

    9th October 2012

  2. I’ve been trying to find out whether the proposed portal extension to el claims also covers el disease claims such as RSI, noise induced hearing loss claims etc but have hit a blank wall – do you know?

    Roberto

    10th October 2012

  3. Mark: ‘Paying parties will, no doubt, take full advantage of the fact that there is likely to be tension between the receiving parties’ lawyers; in particular, I can see that it is possible that it will become commonplace for offers to be made that will specify the amounts for each lawyer’

    I find the position at present to be quite the opposite. The lack of requirement for a PP to breakdown their offer means that counsel/solicitor or solicitor 1/solicitor 2 have an almighty scrap over who is getting what. Breakdowns give a huge amount of transparity and avoid the PP ‘let’s go on everything’ mentality.

    If Part 36 became THE method for making costs offers, it would make things a lot easier.

    On the point about uplifts: Is this a time for barristers to consider in-house appointment?

    Robert Pettitt

    10th October 2012

  4. *Ahem* transparency (I do like making up words!)

    Robert Pettitt

    10th October 2012

  5. Robert: Please forgive me, I think I failed to express myself as well as I should have done.

    At present, where two lawyers (say, a barrister and a solicitor) have provided legal services in the same claim and where they have to share costs between them (i.e., a fixed amount), it is in the interests of each of them to try to maximise the risk that they bore; this is because the success fees are not capped and as such, a higher success fee would mean a bigger slice of the cake. The importance of this is that the arguments that are advanced between opposing parties are the same as those which will be advanced lawyer to lawyer. If, however, the success fee is capped, it is in the interests of the lawyers to minimize the percentage uplift, this being because this will reduce the size of that part of the cake that is capped. This means that the arguments between opposing parties will be diametrically opposed to those that will be made lawyer to lawyer. A clever paying party would recognise this and would try to drive a wedge between the lawyers. He may, for example, offer 5 percent for both between opposing parties (thereby getting the benefit of not making any concessions in that regard), but in negotiations he may offer 25 percent to counsel and 5 percent to the solicitor. This would then make the barrister argue against his own success fee (i.e., it will put him in a position of having to explain why the success fee should be lower). For obvious reasons, it would be a good thing to have the other side’s counsel on your side! Thus, the strategy of a paying party might be to make low offer with the aforesaid breakdown, and then (once the other side’s lawyers have spent a couple of days trying to persuade each other how easy the claim was) make a slightly higher offer without a breakdown. In those circumstances, the chances of a low offer being accepted will be better than if no breakdown had been provided.

    The actual breakdown could be given without prejudice (as opposed to without prejudice save as to costs); this would allow the paying party to have his cake and eat it (i.e., he could divide the lawyers on the other side at the same time as enjoying the protection afforded by a single, overall offer).

    As to in-house counsel, many barristers have gone down that route, but it is still somewhat rare. Whether it will become more common is a good question. One of the difficulties with employing counsel is that specialist counsel are needed only now and again, so few employers would be prepared to bear the cost of full-time employment. Moreover, the Bar is very keen on being “independent” – this being one of the reasons why barristers in private practice are referred to as being “independent” – and as such, there is a general reluctance to enter into contracts of employment. Whether that will change on or not remains to be seen.

    Mark Friston

    10th October 2012

  6. Isn’t the cap strictly limited to the yet-to-be-implemented model under which success fees are only recoverable solicitor-own-client though? And that being the case, the PP won’t have any concern for challenging the risk taken on by RP’s lawyer(s) – indeed it will probably never be mentioned on an inter partes assessment.

    [I may have misunderstood and may have a lightbulb point sometime later!]

    Robert Pettitt

    10th October 2012

  7. Robert: I think it may help if I set out a form of words to be used in the offer that illustrates how it would work.

    The point of the exercise wouldn’t be to actually reduce the amount of the success fee payable (as that would usually be nil between opposing parties), but to soften the opposition by making them fight amongst themselves. The actual success fee itself, of course, would very often not be payable as a discrete item by the paying party (the example above is an exception just for the purposes of demonstrating that the open position can be different from the WP position), but any offer that was made to those lawyers who were acting on the basis that they weren’t going to charge the client would be treated as if it included it. Let me explain why: if solicitor and counsel each are acting under a CFA such that each has a success fee of 25 percent (between solicitor and client) and each has carried out £1,000 worth of work, they will both be after £1,250 as against the client (but before the cap is imposed); let’s say that the cap limits the success fee to £250 in total, this meaning that the total claimed against the client was £2,250. If an offer is made of £1,500 (without any explanation at all), they would probably say “well we would be happy with £750 each, but let’s ask for £1,750 in total and see what happens”. If, on the other hand, the paying party had offered £1.500 on a WPSATC basis but had backed this up with a WP (not WPSATC) explanation that it was £1,000 for one of them and £500 for the other, then this would give rise to an internal dispute between the lawyers and they may not come back to ask for more because they would be fighting amongst themselves; their arguments would include discussions about the success fee even though it is not payable between opposing parties. The paying party could drive this home by saying “by the way, it’s a matter for you, but our view is that the success fee should be 5 percent for counsel and 25 percent for the solicitors”.

    The following form of words is based on figures as set out above (NB It is a Part 47 offer rather than a Part 36 offer):

    Letter One: “Pursuant to CPR rule 47.19 we make an offer to settle the whole of the costs claimed in the Bill of Costs served under Notice of Commencement dated [date] for the sum of £1.500. This offer is inclusive of VAT, disbursements and the costs preparing and checking the Bill of Costs, but exclusive of interest. This offer is without prejudice save as to the costs of the assessment.”

    Letter Two (sent at the same time as Letter One): “This letter is without prejudice (i.e., not without prejudice save as to costs). The offer made in the first letter of today is a self-contained offer that may be accepted without reference to any breakdown between the lawyers concerned. We would like to make it clear, however, that it comprises two parts, one for the solicitors (£1,000 inclusive of VAT) and one for counsel (£500 inclusive of VAT); this is based on our assessment of the relative roles played by the solicitors and by counsel. These parts may not be accepted in isolation, but the breakdown may assist you for the purposes of evaluating the offer.”

    You could stop there, but a mischievous paying party would go on to say this:

    “Whilst we accept it is a matter solely for you, we have also borne in mind our view that the counsel bore nearly no risk and that (as between solicitor and client) his success fee ought to be dealt with accordingly. Our breakdown is not based on this observation, but it is in line with it.”

    If you doubt how difficult this would make life for the receiving party’s lawyers, you try to work out how the £1,500 should be split on the premise that counsel’s success fee is not the same (in terms of percentage uplift) as that of the solicitors; you will not find it easy!

    Don’t forget that success fees will continue to be payable in some cases; that said, I had forgotten that they would generally be fixed, so the reference to the open offer of 5 percent and 25 percent in the example above was a mistake (sorry about that. That said, where the success fee is fixed, then the above tactics would still often work, this being because the success fees payable to counsel and solicitor are often different.

    Finally, the downside with providing a breakdown is that an opponent might say “we can agree the solicitors’ fees at £1,000, so let’s now talk about counsel’s fees”. That risk ought to be borne in mind, but the answer to that would usually be that that approach does not work because of duplication.

    Mark Friston

    11th October 2012

  8. Thanks for taking the time to respond, Mark. I completely follow now.

    I can see that the success fee might became a fighting ground for the lawyers and client, but I don’t necessarily draw the same conclusions as you as to the tactical advantage that it might present to the PP in negotiations.

    Though, of course, I deal with quite a niche area (with regular opponents and the same assisting barristers) and do not have the wider picture in mind.

    ————-

    It has to be asked whether more barristers will try to stick to private retainers (which could be helped with the right push for BTE cover and removal – I wish! – of the restriction of choice pre-proceedings) and/or whether more solicitors decide to carry out routine barrister work (e.g.medium complexity case POCs) in-house.

    Robert Pettitt

    11th October 2012

  9. It is pleasing to see the Jackson reforms are making legal costs so much easier.

    Cockney Rebel

    12th October 2012

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