Hailsham Chambers Annual Costs Group Seminar 2011 – Jackson Update


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Hailsham Chambers have produced a series of podcasts of their latest Annual Costs Group Seminar. Highly recommended.

Here is the Jackson Update:

Success fee cap – What about counsel?


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We looked the other day at whether VAT will be included or excluded from the 25% cap on damages that will apply to success fees. Looking again at the proposed changes to the Courts and Legal Services Act 1990, the Legal Aid, Sentencing and Punishment of Offenders Bill says:

“The additional conditions are that—

(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”

The percentage specified by the Lord Chancellor will presumably be 25%.

Note that the wording is that the “success fee” is subject to a maximum limit, not the total taken from the client.

The current wording of the Courts and Legal Services Act 1990 reads:

“The following further conditions are applicable to a conditional fee agreement which provides for a success fee—

(b) it must state the percentage by which the amount of the fees which would be payable if it were not a conditional fee agreement is to be increased; and

(c) that percentage must not exceed the percentage specified in relation to the description of proceedings to which the agreement relates by order made by the Lord Chancellor.”

The current maximum percentage allowed is 100%. It has never previously been disputed that VAT can be added to the 100% figure. It is not immediately obvious why the wording of the Bill would not allow for VAT to therefore be payable in addition to the 25% cap (meaning clients would have up to 30% of their damages taken in respect of the success fee).

That problem aside, what about counsels’ success fees?

The Bill, and the Court and Legal Services Act 1990, are concerned with individual CFAs, not the overall funding arrangement of the claimant.

Will counsel therefore also be able to charge a success fee that is capped at 25% of damages in addition to that of the solicitor? That would mean that the claimant would lose up to 50% of damages (or 60% if VAT can be added).  What if there is both junior and leading counsel?  Can each take 25% in addition to the solicitors, meaning the claimant would lose up to 75% of damages (or 90% if VAT can be added)?

If not, will the solicitor and counsel have to try to carve up the 25% cap between themselves? It is not obvious that counsel would want to accept instructions on a CFA basis where liability is finely balanced but they will get a success fee based on potentially much less than 25% of the damages, particularly in lower value claims.

It is not obvious that solicitors will want to instruct counsel to act on a CFA where a matter is proceeding to trial on quantum only if they will have to split the 25% cap.  Will they advise the claimant to settle?

Solicitors are unlikely to be willing to treat counsels’ fees as a disbursement if they are paying disbursements out of their own pocket.

Similar cap related problems arise where more than one firm of solicitors has had conduct of a claim. Can each take up to 25% of damages, in addition to counsel? Or must the firms somehow agree amongst themselves how to divide the cap?

The anti-Jackson lobby seems to have focused on all the wrong issues.

Bar Contracting Conference


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On Saturday I ran a workshop, together with specialist costs counsel Mark Friston, at the Bar Council’s Bar Contracting Conference on the impact of Jackson implementation for the Bar.

I had not previously given much thought to this aspect of the proposals but it has thrown up some very interesting problems which I’ll share with you over the next week or two.

Legal Aid, Sentencing and Punishment of Offenders Bill – The missing bits


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I recently mentioned the fact that the Legal Aid, Sentencing and Punishment of Offenders Bill seemed to be strangely silent as to qualified one-way costs shifting, the 10% general damages uplift or proportionality changes.

I am therefore grateful to Kerry Underwood for pointing out that the Government has made it clear that only the changes to the conditional fee regime require primary legislation. Paragraph 35 of the White Paper says under Next Steps:

“Changes to the CFA regime requiring primary legislation will follow as soon as Parliamentary time allows. Other changes will require changes to the Civil Procedure Rules or other secondary legislation. Further consultation will follow in due course, as appropriate. It is envisaged that the reforms will be implemented together, once the legislation is enacted, aside from the reversal of Carver v BAA and increases to recoverable fees for litigants in person which can be taken forward independently more swiftly.”

Kerry says:

“Thus it was always the Government’s intention to get through Parliament the repeal of those parts of the Access to Justice Act 1999 relating to recoverability of additional liabilities and then place before Parliament Statutory Instruments in relation to the rest, as that is all that is needed, and these will be subject to the negative resolution procedure, that is they are passed unless voted down by either chamber of Parliament within 40 days.”

I am also grateful to Neil Rose for further confirmation on this point.  He has spoken to the Ministry of Justice about this and they have said the necessary changes can be done by the rule committee.

I can see this with some of the changes but qualified one-way costs shifting seems a very big change to be done without primary legislation. However, perhaps it just requires CPR 44.3(2) to be reworded:

“If the court decides to make an order about costs –

(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but

(b) the court may make a different order.”

Legal Costs Central


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The Ministry of Justice has been busy setting up its new website containing information previously held on the Courts Service website. All well and good but it means the location of everything has changed and some information has been consigned to an archive website (again with different locations).

This has meant that many of the links previously contained on Legal Costs Central (the one-stop gateway to legal costs information on the internet) had become redundant. I have now updated these and hopefully everything is now working properly.

 

Success fee cap – plus VAT?


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I am grateful to Kerry Underwood for highlighting one unresolved aspect of Jackson implementation.

Lord Justice Jackson recommended that, with an end to recoverability of success fees from paying parties, in personal injury cases there should a cap on the amount of damages that may be taken as a success fee from the client. He recommended a cap set at 25% of the damages other than those for future care and loss. The government has accepted that recommendation.

However, does the 25% figure include or exclude VAT? This does not appear to have been clarified.

As Kerry explains, if VAT is on top then the true rate as far as the client is concerned is 30% (25% plus a further 20% VAT).

On the other hand, if the 25% includes VAT then to the solicitor the actual maximum percentage “take” is 20.83% (25% less 20% VAT).

Either clients or solicitors are going to be more out of pocket than the headline figures suggest.

Kerry also points out that it is crucial to remember that the 25% cap is only on the success fee and thus the claimant’s solicitor is still entitled to charge solicitor and own client costs on top, thus potentially taking far more than 25% of the damages. Whether the claimant personal injury market will bear this remains to be seen.

Kerry’s further thoughts on Jackson implementation can be read here.

I’ll look at the issue of how the cap will apply to success fees on counsels’ fees on another day.

Motto v Trafigura – Interest on Costs


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Master Hurst has ruled in Motto & Others v Trafigura (SCCO, 29/06/2011) (click for judgment) that in a CFA funded case interest on costs should not begin to run until costs have been assessed, rather than the earlier date when judgment is given.

This follows earlier decisions reaching the same conclusion, although not necessarily for identical reasoning, in Bridle v Ikhlas (22nd February 2011, Oxford County Court) and Gray v Toner (11 November 2010, Liverpool County Court).

This decision is likely to be appealed direct to the Court of Appeal.