Legal Cost Specialists

Posts by GWS Law

Impact of inflation on costs

By on Jun 24, 2022 | 0 comments

A client recently asked me my view as to the impact of the current upsurge in inflation on cost matters. These are my initial thoughts: Interest on unpaid costs currently runs at 8%. When the Bank of England base rate was very low, and inflation was very low, this 8% return on unpaid costs was potentially attractive to receiving parties (although this would have to be weighed up against cash flow issues). Now that inflation is running at close to 10%, the 8% rate is no longer particularly attractive as it fails to adequately compensate receiving parties from being kept out of money that is potentially due to them. It is possible, to the extent to which receiving parties give the matter any thought, that this may encourage some to try to settle costs disputes at an earlier stage. It remains to be seen as to whether the judgment rate of 8% is increased to reflect the current high levels of inflation. However, given that no attempt was made to reduce the judgment rate during the long periods of relatively low inflation, it may be that a similar approach of inaction will be adopted now. The argument on the other side is that a judgment rate well in excess of what would be commercially available to investors, and well in excess of the rate of inflation, was not problematic as the high judgment rate positively encouraged early settlement and/or sensible payments on account. Conversely, if the judgment rate is no longer even keeping pace with inflation, then it should be revised upwards. The current high level of inflation is likely to put pressure on those that set the Guideline Hourly Rates to increase these sooner rather than later, and it was certainly anticipated within the last rate review that these should be updated on a regular...

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Law Society CFA unenforceable?

By on Mar 21, 2022 | 1 comment

Recent posts have looked at some of the drafting problems with the Law Society’s (old) model conditional fee agreement. I am grateful to loyal reader of the Legal Costs Blog, Jacques Hughes, for pointing out the rather more significant problem in that all these agreements are probably unenforceable. s58(1) of the Courts and Legal Services Act 1990 provides that: “A conditional fee agreement which satisfies all of the conditions applicable to it by virtue of this section shall not be unenforceable by reason only of its being a conditional fee agreement; but (subject to subsection (5)) any other conditional fee agreement shall be unenforceable.” By virtue of s58(4A) of the Courts and Legal Services Act 1990, additional conditions are applicable where the CFA includes a success fee and relates to proceedings of a description specified by order made by the Lord Chancellor for the purposes of the subsection. The Conditional Fee Agreements Order 2013 specifies personal injury claims as being subject to those additional conditions. s58(4B) of the Courts and Legal Services Act 1990 sets out those additional conditions: “(a) the agreement must provide that the success fee is subject to a maximum limit, (b) the maximum limit must be expressed as a percentage of the descriptions of damages awarded in the proceedings that are specified in the agreement, (c) that percentage must not exceed the percentage specified by order made by the Lord Chancellor in relation to the proceedings or calculated in a manner so specified, and (d) those descriptions of damages may only include descriptions of damages specified by order made by the Lord Chancellor in relation to the proceedings.” The Conditional Fee Agreements Order 2013 sets out the description of damages at s5(2): “(a) general damages for pain, suffering, and loss of amenity; and (b) damages for pecuniary loss, other than future pecuniary loss, net of any sums recoverable by the Compensation Recovery Unit of the Department for Work and Pensions.” s5(1) of the Conditional Fee Agreements Order 2013 sets out maximum percentage: “(a) in proceedings at first instance, 25%; and (b) in all other proceedings, 100%.” Personal injury solicitors should be familiar with all of the above. In simple terms, where there is a personal...

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Recovering shortfall in costs from client’s damages

By on Mar 14, 2022 | 0 comments

During the rough-and-tumble of a typical detailed assessment hearing, where the judge will be making multiple ex tempore decisions, it is routine to hear criticisms of the amount of time claimed by the receiving party and/or criticisms of certain items that have been included within a bill of costs. It is much less usual to see such criticisms make their way into a reserved/reported judgment as such decisions are usually dealing with technical points of principle. The reserved judgement of Senior Master Gordon-Saker in ST v ZY [2022] EWHC B5 (Costs) will therefore make awkward reading for Irwin Mitchell (“IM”), the solicitors concerned. The judgement was handed down, in part, expressly for release to BAILII (ie for wider reading). The Court was dealing with a personal injury case where the successful claimant’s solicitors were seeking to recover a costs shortfall from the claimant’s damages. The very fact that seeking such recovery was viewed as being unusual was highlighted: “In the years since the 2012 Act came into force, some solicitors have sought to recover their success fees from their clients when acting for children or protected parties. In the Costs Office I am aware of only two firms of solicitors who, in such cases, regularly seek to recover the fees which exceed the basic charges recovered between the parties.” In relation to the instructions that had been given to IM’s counsel in advance of the detailed assessment hearing: “It was … unfortunate that on the day that the bill was listed for detailed assessment [IM’s counsel] told me that he had not been provided with the full set of IM’s papers in advance of the hearing, although the court had been provided with them electronically. On the previous two occasions when I have listed IM’s bills for detailed assessment under r.46.4(2), counsel had not been provided with the full set of papers. To misquote Lady Bracknell, once would have been a misfortune. Thrice begins to look like a policy.” In terms of some of the items claimed within the bill, where any shortfall in recovery was being sought from the client: “Quite why it would be reasonable to charge for even a junior fee earner to spend 48 minutes researching the...

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Seeking costs from client in excess of approved budget – ST v ZY

By on Mar 7, 2022 | 0 comments

Given the Court of Appeal recently adjourned the case of CAM Legal v Belsner, we will have to wait some time for guidance from the higher courts on the issue of informed consent when deductions are made from damages in personal injury cases. However, that has not stopped important developments elsewhere on the same issue and particularly where costs are incurred in excess of an approved costs budget. CPR 46.9(3) incorporates an element of informed consent where solicitor/own client costs are being assessed: “Subject to paragraph (2), costs are to be assessed on the indemnity basis but are to be presumed – (a) to have been reasonably incurred if they were incurred with the express or implied approval of the client; (b) to be reasonable in amount if their amount was expressly or impliedly approved by the client; (c) to have been unreasonably incurred if – (i) they are of an unusual nature or amount; and (ii) the solicitor did not tell the client that as a result the costs might not be recovered from the other party.” In ST v ZY [2022] EWHC B5 (Costs), the Court was dealing with a personal injury case where the successful claimant’s solicitors were seeking to recover a costs shortfall from the claimant’s damages. At the outset, and during the claim, the claimant had been advised that there would be a shortfall in costs recovery. The claimant had also been given an estimate of the likely level of that shortfall. At the conclusion of the matter, that estimate proved to be broadly accurate. At this stage, it might be thought that the claimant must be taken to have given, at least implied, approval for those costs that were in excess of that which might be recovered from the other party. The problem for the solicitors was that much of the shortfall was as a consequence of the costs incurred by the solicitors being significantly in excess of the last approved costs budget in respect of a number of phases. During the inter partes detailed assessment, the solicitors were unable to put forward a “good reason” to depart upwards from the last approved budget. This, in part, explained a large proportion of the...

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