Wasted Costs Orders


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The Costs Law Articles Archive section of Legal Costs Central has been updated with an interesting article on the law relating to wasted costs orders.  Thanks to Kerry Underwood.

Faulty breast implant scandal


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Solicitors Journal reports, in relation to potential claims relating to the faulty breast implants scandal, that claimant solicitors Hugh James have said proceedings would be brought as consumer claims against the clinics which fitted the implants on the grounds that they “did not do what they promised”. Given Hugh James are apparently acting for 200 clients the poor judge is going to have his work cut out looking at that many before and after photographs.

The 100% succcess fee myth


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Three cheers for the National Accident Helpline.

Those probably aren’t words you expected to read on the defendant friendly Legal Costs Blog, but credit where credits due.

The National Accident Helpline (NAH) in their desperate lobbying to save their business model, as part of the consultation process into implementation of the Jackson Report, commissioned independent research by academics Professor John Peysner, Dr Angus Nurse and John Flynn from the University of Lincoln. Their report, Excessive & Disproportionate Costs in Litigation, “casts fresh doubt on current government proposals to reform the ‘no win no fee’ compensation regime”.

(The strange thing about reports delivered by independent experts is that they almost always manage to say what those commissioning the report wanted. Have you ever noticed how medical experts instructed by claimants always conclude that the injuries suffered by the claimant are so life-changing that the claimant will never be able to work again or lift anything heavier than a tooth-pick? On the other hand, the medical experts instructed by defendants invariably conclude that there is nothing wrong with the claimant that a strong mug of tea wouldn’t sort out.)

The corresponding press release stated:

“The University of Lincoln researchers examined data on more than 20,000 civil litigation cases and concluded that in certain cases defendant delay can be a significant factor in increased litigation costs and can cost up to six times as much as other causes of delay.

The findings suggest that defendant delays add unnecessary court costs to cases where there is a failure to reach settlement. If a case goes to court, claimants win 90 per cent of the time.”

Traditional wisdom as to cases that go to trial can be found in Master Hurst’s comments in Designer Guild Ltd v Russell Williams (Textiles) Ltd (t/a Washington DC) (No 2) [2003] EWHC 9024 (Costs):

“There is an argument for saying that in any case which reached trial a success fee of 100% is easily justified because both sides presumably believed that they had an arguable and winnable case.”

The courts are not meant to apply the benefit of hindsight when determining the reasonableness of a success fee (“when the court is considering the factors to be taken into account in assessing an additional liability, it will have regard to the facts and circumstances as they reasonably appeared to the solicitor or counsel when the funding arrangement was entered into and at the time of any variation of the arrangement” – Costs Practice Direction 11.7). However, the courts are often persuaded that an initial assessment that a case has no better than 50/50 prospects of success must have been an accurate assessment if the matter does then proceed to trial.

Now, based on this research, we know that cases that proceed to trial are not carefully balanced but only go that far because defendants fail to make proper admissions of liability in weak cases. Using the court approved “Ready Reckoner” to calculate success fees, for cases which proceed to trial if there is a 90% chance of success this justifies a success fee of only 11%. Even where the CFA is entered into after liability has been disputed by the defendant, we now know this means little or nothing. The defendant has probably made an inappropriate decision 90% of the time and the claim will still succeed.

This research also knocks on the head the argument that the “Ready Reckoner” method of calculating success fees is unduly harsh to claimant solicitors as it wrongly assumes that the costs earned in won cases will be the same as the level of costs in lost cases. The argument put forward by some claimant representatives was that explained in Smiths Dock v Edwards [2004] EWHC 1116 QB:

“Mr Morgan QC submitted that because most wholly unsuccessful cases reach trial whilst most successful cases settle before trial, there is a disequilibrium that should result in higher success fees.”

This argument was rejected in Smiths Dock with the Court approving the general use of the “Ready Reckoner”. The claimant argument does nevertheless seem to have been accepted as showing the “Ready Reckoner” did not produce “unfairly high” success fees.

However, we now have evidence, kindly supplied by NAH, showing that the “Ready Reckoner” figures are almost bound to be incorrect and rather than being too low are actually too high. If the vast majority of cases that proceed to trial are won by claimants, the fees earned in won cases will, on average, be higher than the work undertaken on lost cases. The “Ready Reckoner” assumption that “won” and “lost” cases are of equal value is mistaken, but not in the way claimant representatives have previously argued.

This research, if it is accurate, also undermines the assumptions that many ATE insurers apply in relation to staged ATE premiums and the individual “assessments” that some ATE insurers apply to the final stage (usually the pre-trial stage). In Rogers v Merthyr Tydfil CBC [2006] EWCA Civ 1134 the approach of DAS was explained:

“At Stage Three the risks involved vary significantly, and it was felt better to rate this element of the premium individually. DAS’s aim is to make sure that the trial premium is directly proportional to the risk involved, so that each case is individually underwritten, taking into account the merits and the estimated maximum loss figure (EML). In order to calculate the EML the claimant’s solicitor is asked to provide details of the disbursements he has already incurred and an estimate of his own side’s disbursements up to and including trial. He is also asked for an estimate of the opponent’s total costs and disbursements up to and including trial. The estimates provided in the allocation and pre-trial questionnaires are used when they are available.

The underwriter is then required to assess the risk and to apply a percentage in order to calculate the premium. In this case liability had been denied and there was no Part 36 offer. The prospects of success had been assessed by case handlers as ‘acceptable’, which in effect meant 51%. Mr Bellamy would not expect prospects of success to be rated much higher than this in a case about to go to trial where liability was still denied. Based on that information the underwriter applied a rate of 54% to the EML, producing a third stage premium of £3,510 plus IPT. The insurers expect to lose about half the cases which go to trial.”

The NAH research, if correct, shows that this assumption is fundamentally flawed. Instead of losing approximately 50% of cases that go to trial, the success rate is probably nearer 90%. The figures claimed from defendants by way of final stage ATE premiums are almost certainly too high.

The irony may be that research commissioned by NAH to support the current recoverability scheme has shown that the approach of the courts and ATE providers is fundamentally flawed and results in excessive costs being recovered.

[This post is based on an article that previoulsy appeared in Litigation Funding magazine.]

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Legal aid bill ‘would reduce family clients by 75%’


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Following on from the news about the planned extension of fixed fees across the fast-track is the survey for Resolution that found the planned cuts to legal aid will reduce family clients by 75%.

Although accurate figures are hard to come by, some statistics suggest that 20% of costs work is legal aid.

Whether they are glass half full or glass half empty kind of people, law costs draftsmen and costs lawyers are not in any danger of drowning in good news.

Refund on hearing fees


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At the time of filing a pre-trial check list (listing questionnaire) or where the court fixes the trial date or trial week without the need for a pre-trial check list, in addition to the listing fee (currently £110) it is necessary to pay a hearing fee (currently £1,090 for a multi-track matter and £545 for a fast-track matter).

The Civil Proceedings Fees (Amendment) Order 2011 provides at 2.3, as did previous versions, that:

“Where a case is on the multi-track or fast track and, after a hearing date has been fixed, the court receives notice in writing from the party who paid the hearing fee that the case has been settled or discontinued then the following percentages of the hearing fee will be refunded:

(i) 100% if the court is notified more than 28 days before the hearing;
(ii) 75% if the court is notified between 15 and 28 days before the hearing;
(iii) 50% if the court is notified between 7 and 14 days before the hearing.”

At least 80% of the bills of costs I see claim the full hearing fee even where the matter has settled 7 or more days pre-hearing.

I had always assumed this was a little wheeze on the part of claimant lawyers. They would reclaim the fee from the court and then try to recover the fee from the defendant.

However, I was recently asked to review Points of Dispute prepared by another Costs Lawyer. Despite the matter clearly settling at a stage where a refund was available, the point had not been taken. I’m therefore left with the impression that inclusion of this item by some law costs draftsmen is due to ignorance.

On the basis that everyone working in legal costs reads the Legal Costs Blog, there is now no excuse for ignorance or dishonesty. I will treat the next unjustified claim for a hearing fee as tantamount to fraud.

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Motto v Trafigura dead, long live Simcoe v Jacuzzi UK Group


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Those holding their breath for the Court of Appeal to rule on the date from which interest runs, in the case of Motto v Trafigura, needn’t have bothered. The parties have compromised the case and the appeal will not go ahead.

However, all is not lost. The Court was due to hear another case on the same issue on the same date (30/1/12), Simcoe v Jacuzzi UK Group plc, and that appeal remains live. Simcoe concerns interest in the County Court, rather than interest in the High Court (as in Motto), and the rules are somewhat different between the two courts. However, it can be anticipated that the judgment will be wide enough to provided clarity across the board.

Fixed costs extension to go ahead


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The missing piece of the Jackson legal costs reforms is about to be slotted into place. Jackson proposed fixed fees across the fast-track and, although other areas of his recommendations seem certain to be implemented, this was the one glaring omission from the concrete proposals.

David Cameron has now announced the firm intention of the government to extend fixed fees. The Law Society Gazettte ran with the somewhat misleading claim that “David Cameron today announced plans to cap lawyers’ fees from personal injury claims at £25,000”.

Legal Futures gives, I suspect, a rather more accurate summary:

“The government is to extend the upper limit of the road traffic accident (RTA) portal to £25,000, while similar fixed-fee schemes are to be introduced into other, as yet unspecified, areas of personal injury … All that is definite right now is the extension of the RTA portal limit from the current £10,000 and that the model will be used for other areas of personal injury work. Legal Futures understands that this is very likely to include both employer’s and public liability, but more work is still needed before deciding whether industrial disease and clinical negligence cases will be caught too. It is unknown at the moment whether the new regimes will be for cases worth up to £10,000 or £25,000.”

The current £10,000 limit for RTA claims apparently catches around 80% of such cases. Previous government predictions are that extending this to £25,000 would capture 90% of such claims. Assuming that average damages for non-RTA claims are not dissimilar to RTA claims, a similar extension into other personal injury work would have a similar impact.

My back of the envelope calculations suggest that, excluding clinical negligence, approximately 75% of claims that currently fall outside a fixed costs regime would be caught by an extension to £25,000, with a corresponding reduction in costs work.

Best estimates are that around 50% of work currently undertaken by law costs draftsman and Costs Lawyers is personal injury work. This obviously masks the fact that some are 100% reliant on this work.

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White Paper Legal Costs Conference


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The White Paper Conference Company has lined up another cracking legal costs conference on Costs, Funding, CFAs and Jackson for 8 February 2012. The speakers include: Ben Williams (39 Essex Street), Gordon Wignall (No 5 Chambers), Andrew Post (Hailsham Chambers), Roger Mallalieu (4 New Square), Michael Napier (Irwin Mitchell), David Marshall (Anthony Gold Solicitors), Kerry Underwood (Underwoods Solicitors), Michael Kain (Kain Knight) and Keith Hayward (Victory Legal Costs).

The normal price is £199 plus VAT which, in itself, is an absolute bargain. However, the Legal Costs Blog has secured a £30 discount for our readers bringing the cost down to an absolute steal of £169 plus VAT. Visit: http://www.whitepaper.co.uk/riskbasedlitch.html to secure your discount and to read the full programme.

See you there.

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Law costs draftsman wanted


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Gibbs Wyatt Stone is looking to recruit a junior law costs draftsman to join its niche defendant practice with an unrivalled reputation for excellence. This is a fantastic opportunity for someone interested in pursuing a serious career in costs.

Visit www.gwslaw.co.uk/recruitment/ for more details.