I’ve uploaded an old article from September 2009 that made predictions on the future of the legal costs industry in light of the Preliminary Report from Lord Justice Jackson. How many of these predictions were accurate? First published in the Solicitors Journal.
I’ve uploaded an old article from April 2011 that originally appeared Litigation Funding magazine. This was written in response to research commissioned by the National Accident Helpline that formed part of their response to the original Jackson consultation process. At the time, an article based on this report appeared in the Law Society Gazette, written by the National Accident Helpline. The thrust of that article (and the research) was to try to justify the continued recoverability of success fees and ATE premiums on the basis that the true cause of high legal costs was delay/unreasonable behaviour by defendant insurers as opposed to recoverable additional liabilities. In fact, what the research seemed to show was that success fees and ATE premiums were set at excessive levels in light of the very high success rate of claims. In the event, the research made no difference and the Jackson proposals were accepted.
The case of Allen v Brethertons LLP  EWHC B3 (Costs) has received a fair amount of commentary in relation to the entitlement of non-Costs Lawyers to undertake certain “reserved activities”.
Costs Judge Master Leonard had no difficulty accepting that where a costs draftsman prepared a bill of costs under the supervision and instruction of a Costs Lawyer, that, although bill preparation amounted to a “preparation of a reserved instrument” and was therefore a “reserved activity”, the costs draftsman became an “exempt person” in this situation and the costs of preparing the bill are recoverable in principle.
Further, in relation to a costs draftsman attending a costs hearing:
“The issue of his right to appear as an advocate on costs hearings has come up before. His case is probably on all fours with Kynaston v Carroll but it is in any event my practice, for the avoidance of doubt, to grant him a right of audience. That was the basis upon which I heard him on 15 January. He was, for the purposes of that hearing, an exempt person, and his costs of preparation for and attending that hearing are, insofar as reasonable and proportionate, recoverable.”
The case of Kynaston was as far back as 2011 and it is surprising that the same tired arguments keep being re-run.
Nevertheless, re-run it was and appears to have been, at least in part, inspired by (or at least support sought from) a guidance note published by the Costs Lawyers Standards Board (CLSB). Master Leonard summarised the contents of that guidance as stating:
“That guidance emphasises that the CLSB authorises and regulates individual costs lawyers, not authorised entities or licensed alternative business structures: and in consequence, that a Costs Lawyer cannot delegate reserved legal activities such as the exercise of a right of audience or the conduct of litigation.”
The CLSB guidance note is titled Reserved Legal Activity Rights and was apparently published on 18 July 2018, although I do not recall the CLSB circulating it to Costs Layers. It states:
“This guidance has been written to clarify the authorised rights of a Costs Lawyer (as defined). It has been approved by specialist regulatory counsel, Gregory Treverton-Jones QC.”
It is worth setting out in full what the guidance says in relation to rights of audience:
“3. RIGHT OF AUDIENCE
(i) Definition under the LSA
Schedule 2, paragraph 3(1):
A “right of audience” means a right to appear before and address a court, including the right to call and examine witnesses.
(ii) Can a Costs Lawyer delegate this right?
No. The CLSB authorises and regulates individual Costs Lawyers, and under s.18 it is the Costs Lawyer who is authorised in relation to this reserved legal activity. Under s.13 only an entitled (authorised) person may undertake a reserved legal activity, and the LSA makes no provision for the delegation of this specific right by an entitled (authorised) person.
Therefore, subject to paragraph 1(7) of Schedule 3 (set out below), if a Costs Lawyer sends a colleague to a Court hearing, that individual will not be entitled (authorised) to address the Court unless they are entitled (authorised) as a Costs Lawyer, or they are permitted to address the Court by the Court itself in the exercise of its discretion.
(iii) Exemptions to an offence under s.14
Schedule 3, paragraph 1:
(2) The person is exempt if the person-
(a) is not an authorised person in relation to that activity, but
(b) has a right of audience granted by the court in relation to those proceedings.
(3) The person is exempt if the person-
(a) is not an authorised person in relation to that activity, but
(b) has a right of audience before the court in relation to those proceedings granted by or under any enactment.
(7) 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.
(8) This sub-paragraph applies to-
(a) any authorised person in relation to an activity which constitutes the conduct of litigation;
(b) any authorised person who by virtue of section 193 is not required to be entitled to carry on such an activity.”
The guidance note expressly recognises the exemption set out in paragraph 1(7) of Schedule 3. However, I struggle to understand the purpose of a “guidance note” that sets out an exemption but then conspicuously fails to explain in what situation this exemption will apply.
Even those who have, in the past, sought to put the most limited interpretation on “being heard in chambers”, have treated this as permitting (where instructed and supervised) a non-regulated person (eg costs draftsman) to attend a hearing in private (eg trial ordered to be in private on national security grounds; although this is, admittedly, not an example usually put forward by those arguing for this interpretation of “in chambers”). But, even on this interpretation, it clearly would permit a Costs Lawyer to send a colleague to a Court hearing where the hearing is “in private”.
In truth, of course, “in chambers” does not mean “in private” and on a proper analysis (ie the analysis applied in Kynaston and applied daily by the Senior Courts Costs Office), “in chambers” will cover any detailed assessment hearing (and, almost certainly, any costs management hearing). For the purposes of the day-to-day work of Costs Lawyers, and those to whom they might delegate attendance at court, the guidance note is simply wrong. Paragraph 1(7) of Schedule 3 probably only prevents delegation in respect of appeals or hearings concerning what costs order to make at the conclusion of a case.
Other interpretations are available (see Friston on Costs at 3.85-3.90 for an analysis of the competing arguments) but it is less than helpful if the CLSB issues guidance notes stating as fact something which is, at best, highly debatable. I say: “highly debatable”; the High Court in Kynaston said such: “arguments have no merit at all”. Master Leonard’s decision certainly reflects what I understand to be the Senior Courts Costs Office’s belt-and-braces approach to the issue: costs draftsmen instructed in this way are probably covered by Kynaston but, if not, the court would exercise its discretion as a matter of routine.
What is interesting about the Allen decision is how this has been greeted by the Association of Costs Lawyers (ACL). Responding to the decision, incoming ACL chair Claire Green said:
“Master Leonard has firmly dismissed this attempt to undermine the work of Costs Lawyers, who play a vital role in ensuring that the costs regime works smoothly and fairly. We are independent, regulated lawyers, with the attendant benefits and responsibilities that such status brings. This ruling should halt in their tracks what the judge called ‘arid technical objections’ to the recovery of the costs of our work.”
It may be remembered that the ACL had previously been very vocal in attempts to exclude costs draftsmen from detailed assessment hearings and limit rights of audience to Costs Lawyers (and, perhaps, begrudgingly, costs counsel). Now, it sees it as a positive development that Costs Lawyers can delegate attendance at detailed assessment hearings to costs draftsmen.
My office is in the process of being redecorated and this seemed like a good opportunity to have a general clear out.
As part of this, I came across a couple of articles published in Litigation Funding magazine from February and April 2000.
These show the dangers of trying to make predictions about the future of litigation.
In one article, barrister Gordon Wignall was quoted as saying:
“There is no reason now why either clients or unsuccessful defendants should not challenge the validity of their opponents’ lawyers’ retainers. There are likely to be disputes over new-style funding arrangements for years to come.”
In the other article, solicitor Kerry Underwood was quoted as saying:
“Satellite litigation [over CFAs] won’t be a cottage industry it will be a palace industry. … Everyone who knows anything about this area knows how complicated it is. There isn’t a hope in hell of district judges arriving at reasoned decisions.”
19 years later, I bet they both feel pretty silly.
The Legal Services Board (LSB) is apparently minded to refuse the Cost Lawyer Standards Board’s (CLSB) proposals to introduce a new route of entry into the profession.
The LSB chief executive Neil Buckley said:
“Having considered the application and responses provided by the CLSB to a number of issues that the LSB has raised, the proposed changes continue to raise significant questions for the LSB and, as a result, we are considering refusing the application under paragraph 25(3) of schedule 4 to the [Legal Services] Act.”
Mr Buckley said the proposed approach to granting rights of audience appeared “inadequate” and to contradict the wider outcomes-focused approach of the CLCA:
“In particular, the proposal to allow for rights of audience to be gained through attendance at a one day training course, with no assessment, is at odds with the CLSB’s rationale for the CLCA, to shift away from an inputs based model and towards an outcomes-focussed assessment based model. The proposal would appear to set the bar considerably lower than other approved regulators in relation to awarding rights of audience. The CLSB has not presented sufficient evidence to justify this approach.”
It is not clear whether the LSB is aware that the majority of current Costs Lawyers gained their rights of audience through no more than attendance at a one or two-day training course with no assessment.
I wrote about this in 2011. At the time, I commented that:
“In relation to advocacy, the ACL has not set the bar too low. It never set one in the first place and shows no plans to do so in the future.”
The LSB appears to be concerned that the CLSB is now in danger of repeating the same error in relation to its new proposed qualification route.
In relation to the old ACL training course, I wrote:
“There appear to be one of two ways of viewing this issue:
- Advocacy, at least in relation to detailed assessment proceedings, is something requiring little or no skill or experience. This includes costs appeals before High Court Judges and Circuit Judges. A level of “competence” can be achieved by those who may have had no previous advocacy experience in a 3 hour training session. Any form of initial or ongoing assessment is entirely unnecessary given how undemanding costs advocacy is. In this context, the ACL’s chairman’s comment that some of its members should be saying in big cases: ‘Don’t instruct a barrister. I can do this’ makes perfect sense. The ACL granting higher rights of audience as though they were handing out Smarties is nothing to be concerned about.
- Advocacy, at whatever level, is indeed a specialist skill that requires proper training and should be properly assessed. The ACL Costs Lawyer course should ensure that those standards have been met before granting higher rights of audience. The course is not fit for purpose.”
If the LSB is concerned that the proposed new training course is inadequate in respect to the granting of rights of audience, how does it judge the competency of many existing Costs Lawyers who achieved their rights of audience under the old ACL (one/two day) training route?
The Civil Litigation Brief blog contained an interesting post about the dangers of lawyers working on the move and being overheard discussing confidential client matters or allowing confidential information to be read over their shoulders or leaving legal papers behind.
The costs profession is not immune. Of the various examples given on Twitter:
“Absolutely correct. I once called to collect some files from a cost draftsman’s office. Manager greets me and says he’ll just get the files …. from his car. I almost had an apoplectic fit!” – Donna Beckett@BeckettandCo
“I once received a call from a bouncer of a London pub. Our cost draftsman had left one of our files there. Apparently it was a con with Counsel!” – Peter McKenna@PeterMcKenna2
When dealing with high value personal injury litigation, paying parties tend not to lose much sleep over the issue of whether VAT should be paid on the full amount of medical records fees, where the medical records are obtained through a medical reporting organisation (“MRO”), or whether VAT should only apply to the MRO’s administration fee.
On the other hand, for volume, lower value claims, the impact of this small amount per case can be significant when insurers are dealing with 10,000s or 100,000s of claims.
In Matthew Hoe’s excellent “A Practical Guide to Costs in Personal Injury Cases”, published as far back as April 2016, he writes:
“VAT on medical report fees is a doggedly contentious issue that has been producing notable judgments for a decade. Although very small sums are involved in each case, it arises in so many claims that paying parties take the point. The basic propositions are generally accepted and the disputes centre on the practices of medical agencies.
The correct VAT treatment of medical fees by medical agencies is an issue in desperate need of a decision by the senior courts to settle the point once and for all.”
As if by magic, three years later we have such a decision.
In British Airways Plc v Prosser  EWCA Civ 547 the Court of Appeal held:
- It would normally be appropriate for MRO’s, in circumstances where they were doing more than simply acting as a post-box and where the report/records are being requested by the solicitors to enable them to perform their service to the client (rather than the solicitors acting just as the client’s agent), for VAT to be charged by the MRO on the total cost.
- In the context of a low value claims, where the amount of any VAT is not substantial, payment of VAT on the full amount was a cost that was “reasonably and proportionately incurred” and “reasonable and proportionate in amount”, so as to satisfy the requirements of CPR 44.3 regardless of whether the MRO was actually obliged to charge VAT as it did.
For many years, a large number of personal injury solicitors have automatically charged their clients a 100% success fee regardless of the risks of the case. This has been a standard business model for many firms, with the reasoning being that this will usually lead to an automatic 25% cut of the client’s general and existing financial damages (as a result of the cap on the level of success fee in personal injury claims) in addition to any costs recovered from the other side.
The Court of Appeal has now held, in the case of Herbert v H H Law Ltd  EWCA Civ 527, that this will normally be inappropriate and that any success fee should reflect the actual risks in the case (here held to be 15% for a straightforward RTA) unless the client has given “informed consent”.
In terms of CFAs already entered into, this decision is likely to open the floodgates to solicitor/own client challenges.
Going forwards, it is likely to be an uphill struggle, when entering into new CFAs, to show that the average lay client has given informed consent to a success fee that does not fairly reflect the risks of the case.
For a detailed summary of this decision, see Robin Dunne’s, junior counsel for the respondents in the appeal, article. This also deals with the important issue of whether an ATE premium is a disbursement that needs to be included within a statute bill.
The Ministry of Justice (MoJ) has announced its intention to implement Sir Rupert Jackson’s proposals for extending fixed recoverable costs to most cases worth up to £100,000.
However, rather than introducing a new intermediate track for cases worth £25,000 to £100,000, as Sir Rupert had suggested, it proposes extending the fast-track to claims worth up to £100,000.
The MoJ has accepted the fixed costs figures set out in the grid proposed by Sir Rupert in his 2017 report:
“Sir Rupert consulted with his team of 14 assessors, drawing on a breadth of views and experience, and brought his own expertise to bear in finalising the figures. As such, we consider that the figures have been devised with appropriate rigour and intend to implement them as he recommends.”
The MoJ has proposed an uplift of 35% on the fixed costs figure where a party succeeds on a Part 36 offer. This will replace an order for costs on the indemnity basis.
The intention is to make the extended fixed costs regime more watertight and thereby make escaping it harder. This will clearly require careful drafting.
In the event there remains a dispute as to the costs payable, and the matter has not gone to trial with the costs being summarily assessed, there will be a shortened form of detailed assessment, with a provisional assessment fee cap of £500.
If that was not enough, the MoJ has stated:
“It remains our intention to extend the areas in which costs are controlled in due course: such an extension could include extending FRC to further categories of claims, including claims of higher value, and controlling costs incurred before the first costs and case management conference, where cases are not otherwise subject to FRC.”
The matter is now out for Consultation, with closing dates for submissions by 6 June 2019.