Properly drafted bills of costs

I previously discussed the issue of what hourly rate is appropriate for drafting a bill of costs. I suggested that for the vast majority of bills Grade D rates were appropriate.

One reader responded that those bills with “difficult apportionment issues or multiple parties with costs orders going here and there” should justify a higher rate.

I will immediately concede that this type of bill can be very complicated to properly draft. This is in large part due to the uncertainties of the law surrounding these complex areas. How about the following:

“The principles established in Medway Oil and Storage Co Ltd v Continental Contractors Ltd [1929] AC 88, HL concerning the costs of claims and counterclaims have been largely overridden by the introduction of the CPR. Discuss.”

Issues surrounding apportionment of common costs are fiendishly difficult. Other than a brief mention in relation to group actions, I can see no attempt by Cook on Costs 2010 to even try to deal with this area. Civil Costs: Law and Practice gives a detailed analysis of some of the principles that apply but does not put forward any clear guidance as to how some of the problem issues should be resolved. (What does the ALCD training information have to say about this area?)

Although it may well be the case that a properly drafted bill in relation to one of these problem areas would justify above Grade D rates – and I reserve my position on that – unfortunately, it is this type of bill that is often most poorly drafted. I suspect that the majority of the time this has nothing to do with the receiving party deliberately drafting the bill in the most favourable manner arguable, but rather reflects a failure to understand that there is even an issue. Even worse is the situation where an attempt at apportionment, for example, has been made but this appears to have been done in an entirely arbitrary and random manner. Often it is impossible to work out how the apportionment has been applied. The paying party is left to guess.

So, well done to the costs draftsman who drafted the bill I recently saw where the pre-amble explains:

“The Bill of Costs has been prepared to include all costs incurred representing both the First and Second Claimants. Where work has been undertaken in respect of both Claimants, including letters, telephone calls, attendances and documents items, time spent has been claimed in full, however only half the monetary amount payable is claimed in each part of the Bill. All other time claimed relates solely to each Claimant or has been split between the claims already.”

This way, everything was nice and clear from the outset.

Actually, the bill itself was then somewhat confusing as to how common costs had been apportioned or divided.

Oh, and the Bill did claim VAT incorrectly.

Oh, and the relevant information in relation to additional liabilities was not served.

Still, you can’t have everything in life.

It’s all in the mind

A while ago I commented on the British Chiropractic Association (BCA) dropping their libel action against science writer Simon Singh where the BCA had sued Dr Singh over a newspaper article in which he alleged that the organisation promoted “bogus treatments”.

I fear that my comments on alternative treatments may have opened a whole can of worms and have given every lawyer in the country carte blanche to comment on the efficacy of such treatments.

Richard Barr, a consultant with Scott-Moncrieff Harbour and Sinclair, in Solicitors Journal, wrote:

“When your baby dies, don’t sue me” warned the angry obstetrician when my wife (as she then wasn’t) refused his advice to stay in hospital because her as yet unborn son was stubbornly in the breach position. The obstetrician said there was no hope of turning him and he insisted she should have a Caesarean. She on the other hand really wanted to have a home birth; the problem was solved when her midwife administered a homeopathic remedy. Within hours the baby turned and was born naturally. Last year the baby achieved first class honours at Oxford Brookes University.

Oxford Brookes University! That shows the dangers of dabbling in alternative remedies.

Mrs Barr subsequently decided to train as a homeopath on the basis that although: “on the face of it, it makes no sense at all but I have seen it work so many times that I am convinced that homeopathic remedies work” and expressed the view that there was something about homeopathy that was far more effective than placebo. Richard Barr agrees.

Now, the way that science discovers whether a particular form of treatment works, or works better than placebo, is by undertaking thorough blind trials. If the treatment is shown to outperform the placebo then this suggests that it is effective. When this has been attempted with homeopathy, it has failed to produce any such clear result (see The end of homeopathy?). So how has Mrs Barr been able to identify a set of statistically relevant outcomes that have eluded science?

On the subject of “how does it work”, Richard Barr explains: “It should be remembered that homeopathy is not just a matter of dishing out pills. The key seems to be in the time spent analysing the individual and coming to the indicated treatment for that person. Homeopaths … take a huge amount of time to find out about their patients as opposed to the seven minutes or so that are allocated to the average GP appointment”. Barr has almost certainly hit the nail on the head here but appears to have missed, or at least isn’t prepared to publically spell-out, what conclusion this leads to. To the extent to which homeopathy does, questionably, work, it is not because the extra time spent with the patient is more likely to lead to the “correct” pill being prescribed. There is nothing in homeopath pills that could work. It is the very act of spending time a significant amount of time with the patient, sympathetically discussing their problems, that produces the positive results that homeopathy and other alternative treatments sometimes seem to produce. This is the powerful, and much under-valued, placebo effect.

Of course, I suppose one should not be surprised that lawyers are as susceptible as non-lawyers to alternative therapies and superstitious beliefs. I would confidently predict that a number of readers of the Legal Costs Blog believe, at least to a certain extent, in astrology. I would be equally confident that a high proportion of these readers are Capricorns. Capricorns are well known for their irrational belief in a connection between star signs and personality traits.

Having said all of this, I am seriously considering hiring Paul the “psychic” octopus to advise me on the level of success fees that costs judges are likely to allow in public liability tripping claims.

For yet more on the power of the placebo effect, watch this:

(If you receive the Legal Costs Blog via email you made need to adjust your security settings or visit the Blog online to view the video.)

Friston v Cook

OK.  So the title of this post is somewhat misleading.  I’m not running with that debate (I caused enough trouble with my Costs Counsel v Costs Lawyer post).

Dominic Regan, in his recent book review of “Friston on Costs“, as he titles it, does start down that road but happily concludes: “Buy both”.

This review originally appeared in New Law Journal and is reproduced with the kind permission of Dominic.

Late last year Ward LJ described Cook on Costs as the seminal work on a subject which has created more angst (and generated yet more costs) in the last decade than any other subject in the field of civil procedure. The costs wars are objectively and masterfully described in the Jackson material. These concerns provoked the then master of the rolls to turn to Sir Rupert Jackson for guidance on what on earth to do.

Those who are recently qualified will find it impossible to believe that not so long ago costs were a mere afterthought. Of course, there were arguments about quantum but the elaborate technical arguments which are now commonplace just did not arise.


Dr Mark Friston (Kings Chambers) has now entered the arena with a blockbuster running to over 1,200 pages. I adore books but this is the first time I have ever seen the text extending to the inside back cover of a tome. The obvious question is which one do I buy? (Cook or Friston?) Both is the answer. They complement one another and do not occupy the same turf.

Friston has produced an exhaustive, technical encyclopaedia of costs. Arcane points are covered in exquisite detail. The footnotes are magnificent. Can I recover the cost of an expert report which I did not rely upon? Here you will find your answer. Those on the frontline of costs disputes should have this work surgically attached to them. The publishers, Jordans, are to be congratulated upon producing the title at a very modest price (even cheaper on Amazon at £56.67 as I write).

“Those on the frontline of costs disputes should have this work surgically attached to them.”

There is only one serious problem with the book and it is not down to the author. The index is thorough, too thorough. Look for one of the many landmark cases and you will find 10–15 or even more than 20 references. Which one deals with the crux of the case and describes the key principle(s)? The next edition, and I am certain there will be one, would benefit from highlighting in bold the main reference. Indeed, might not the next edition usefully be accompanied by a CD version to make searching easier?

Cook on Costs, unlike its author, has fattened up considerably over the years. What began life as something akin to a novella because back then the law was simpler is now a full blown work. It is held in high regard. I had a sense of déjà vu when reading a recent case from the Court of Appeal on the question of retainers. When I looked up the relevant passage in Cook I could see that the court had utterly accepted the lucid explanation put forward in the book. Unbelievably, Cook is an entertainment. One can read it and derive both knowledge and pleasure for it is witty and accessible. Few but those owners of several anoraks would sit down with Friston, panting at what chapter 12 might contain.

Whereas Dr Friston takes pleasure in finding those obscure gems of authority, Cook will only publish cases decided by a High Court judge or an appellate court. So, we have Friston which I think has made a significant contribution to the vast costs landscape. It is ironic that the important Part 36 decision in Gibbon v Manchester City Council [2010] All ER (D) 218 (Jun) only appeared after publication of Friston; he appeared for Mrs Gibbon before the Court of Appeal! A new Cook will appear in November. The combined cost of both titles is less than the rate for one fee-earner putting in an hour. Buy both.

Book review by Dominic Regan, professor of law

There is one aspect of the review I would take issue with and that it the view that:

“Whereas Dr Friston takes pleasure in finding those obscure gems of authority, Cook will only publish cases decided by a High Court judge or an appellate court.”

Cook on Costs 2010 refers to the cases of Brierley v Prescott [2006] EWHC 90062 (Costs) and Pirie v Ayling [2003] EWHC 9006 (Costs).  These are both first instance SCCO decisions.  I only mention these two particular examples as I acted for the defendants in both cases.  There are various other examples of decisions from the lower courts.

I know that Dr Friston was actually meticulous in trying to minimise reference to decisions of the lower courts (no doubt recognising the fault that many costs practitioners fall into where every decision by a deputy district judge or costs officer becomes elevated to a binding authority).  Those few cases from the lower courts (including coincidentally both Brierley and Pirie) that are mentioned in Friston are ones where there is a real point of principle. 

Association of Law Costs Draftsmen benefits

The Association of Law Costs Draftsmen has negotiated a reduced Lawtel subscription fee for its members.  The reduced subscription fee is £300.00 plus VAT per annum per licence (normally £680.00 plus VAT).  When Lawtel says “normally” this should probably be treated rather loosely as their subscription renewal requests tend to be on the imaginative side at best.  Nevertheless, this a great deal the ALCD has secured.  

The ALCD also has group membership of Central Law Training which enable members to obtain a discount of up to 50% on most courses.

The ALCD is starting to build up some very useful additional benefits for its members.

County Court Provisional Assessment Pilot

Now that we’ve all had the chance to consider the new rules for the County Court Provisional Assessment Pilot, which starts on 1 October 2010, lets make sure we are all familiar with the details.

CPD 40.12 appears to continue to apply:

The following provisions apply in respect of the papers to be filed in support of the bill;

(a) If the claim is for costs only without any additional liability the papers to be filed, and the order in which they are to be arranged are as follows:

(i) instructions and briefs to counsel arranged in chronological order together with all advices, opinions and drafts received and response to such instructions;

(ii) reports and opinions of medical and other experts;

(iii) any other relevant papers;

(iv) a full set of any relevant pleadings to the extent that they have not already been filed in court.

(v) correspondence, files and attendance notes;

(b) where the claim is in respect of an additional liability only, such of the papers listed at (a) above, as are relevant to the issues raised by the claim for additional liability;

(c) where the claim is for both base costs and an additional liability, the papers listed at (a) above, together with any papers relevant to the issues raised by the claim for additional liability.

CPD 40.11 does not. That part says:

Unless the court directs otherwise the receiving party must file with the court the papers in support of the bill not less than 7 days before the date for the detailed assessment hearing and not more than 14 days before that date.

When do the documents referred to in CPD 40.12 get filed, if at all? I heard a rumour that the provisional assessment would be done without the file but the fact CPD 40.12 remains in place seems to suggest the opposite.

Gibbon v Manchester City Council

The legal press has started to catch up with the importance of the Court of Appeal’s recent decision in Gibbon v Manchester City Council [2010] EWCA Civ 726) but I doubt all civil litigators have done so.

This decision makes clear that basic contract law principles do not apply to the Part 36 regime. 

A Part 36 offer remains open for acceptance until written notice is served withdrawing or changing the terms of the offer (CPR 36.9(2)). (Although see CPR 36.9(3).)

This means that an offer remains open for acceptance regardless of express or implied rejection of the offer by the other side and regardless of any counter-offers made and regardless of the fact that the offeror has subsequently made a different offer.  It goes without saying that the offer also remains live despite material changes in the claim – such as fresh medical evidence becoming available.

Now, if there are any practitioners who have not acted on this decision: ACT NOW!

Review all your cases to see what Part 36 offers were made during the claim but have not been withdrawn or changed.  If it is the other side’s offer, considering whether to accept it now. If it is you own offer, consider whether you wish it to remain live.

Going forward, it is crucial to keep at the front of your mind any Part 36 offers that have been made during the life of the claim and to review carefully on every occasion there is a development in the claim.

The scope for a professional negligence claim if you fail to accept/withdraw an offer, possibly made several years earlier, is frightening.

There are a couple of other points to bear in mind.  An offer that is expressed to be open for acceptance for only a limited period is not treated as a Part 36 offer.  If a Part 36 offer is withdrawn it will be treated as though it was never a Part 36 offer.

This second issue raises its own problems.  Suppose a defendant makes a Part 36 offer of £500,000. Offer remains open for two years. Subsequently the defendant obtains surveillance evidence showing clear exaggeration, withdraws the offer and makes a fresh Part 36 offer for £25,000.  A year later, at trial, the court awards £30,000.  The first offer has no automatic consequences and the second offer has been beaten.  The court must “have regard” to the first offer under CPR 44.3(4)(c) but no more.  What costs order would it be appropriate to make?

If this doesn’t lead to endless satellite litigation I’ll eat my hat.

It does also create a dilemma as to whether to withdraw a Part 36 offer, that is now considered to be too generous, if the protection the offer had given will disappear at the same time.  A very careful balancing act is likely to be required.

VAT on medical fees

The Law Society Gazette recently reported on HMRC’s decision requiring solicitors to charge VAT on medical reports on the basis that they are obtained to provide a legal service and can no longer be treated as disbursments that were not subject to VAT.  The Law Society is to make written submissions in a forthcoming VAT tribunal case on this issue in Barratt Goff & Tomlinson (BGT) v The Commissioners for HMRC.

This ties in with the decision Makuwatsine v Trathens Travel Services Limited (view judgment) where it was held that VAT should be charged by solicitors on any medical records obtained and that they were not VAT exempt disbursements. 

It is not long ago that all medical reports and records were treated as VAT exempt disbursements. 

These developments may be good news for a cash-strapped government but are hardly good news for defendants. 

There is also concern among law costs draftsmen assuming this is retrospective.  Solicitors will be liable for VAT on medical disbursements where no VAT may have been claimed from the paying party.  This could lead to solicitor clients seeking reimbursement of the VAT from the law costs draftsmen who prepared the bill as the VAT had been wrongly omitted.

How many lawyers does it take to change a light bulb?

How many lawyers does it take to change a light bulb?

At what stage does a legitimate claim for legal costs become something rather different…

On an entirely different note, I came across the following in a bill of costs the other day:

20/07/2007 – Discussing strategy as to ATE insurance upon a lack of response. Confirming need to chase. (Senior Paralegal) – 6 minutes

20/07/2007 – Discussing strategy as to ATE insurance upon a lack of response. Confirming need to chase. Preparing a file note (Paralegal) – 12 minutes

There was presumably a corresponding chase-up telephone call claimed under routine communications (a further 6 minutes) as there was a further entry of 6 minutes for: “23/07/2007 – Preparing file note following telephone attendance with [ATE insurer] chasing response to application”. Ignoring the issue of whether work done in association with funding is recoverable, we therefore have a total of 30 minutes claimed in relation to making one chase-up telephone call due to a lack of response from the ATE insurer.

The matter was funded by way of a CFA with a 100% success fee. Even allowing for the fact the work was done by Grade C and D fee earners, by the time VAT is added a total of £151.58 is claimed for one chase-up telephone call.

The same bill also had these entries:

28/09/2009 – Discussing correspondence from defendant advising upon address of defendant. Discussing action to take in circumstances (Associate Solicitor) – 12 minutes

28/09/2009 – Discussing correspondence from defendant advising upon address of defendant. Discussing action to take in circumstances (Paralegal) – 12 minutes

The description of the correspondence is accurate. The email contained no other information. (We’ll ignore the general rule that “no separate charge is to be made for in-coming letters or e-mails” (CPD 4.16(1).)

I would have loved to have been a fly on the wall when the discussion took place between Tweedledum and Tweedledee arguing over what to do in light of this dramatic development in the case.

Defendant law costs draftsmen will probably have guessed which firm of solicitors had the cheek to serve this bill.

The courts do have the power to penalise on detailed assessment this type of inflated bill (under Part 47.18(2)(b) and (c)). Unfortunately, the courts are very slow to exercise this power even when bills are reduced by 40%+. It is unfortunate that the Jackson Costs Review did not propose a fixed penalty for those serving bills that are reduced by more than a certain margin. It is the absence of any clear sanction that encourages claimant solicitors to serve grossly inflated bills with impunity.