Flaws with new guidance for Precedent H


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News:

Latest news on new RTA portal fees and timing of extension of portal for employers’ and public liability cases over on Litigation Futures. I’m getting Jackson indigestion.

Comment:

Excellent analysis from Costs Lawyer Matthew Harman on flaws with new guidance for Precedent H.

Also, why does Precedent H clearly state:

“This estimate excludes VAT (if applicable), court fees, success fees and ATE insurance premiums (if applicable), costs of detailed assessment, costs of any appeals, costs of enforcing any judgment and [complete as appropriate]”

but then have on the next four pages a row for “Court fees”?

New Costs Practice Direction


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The new Costs Practice Direction has finally been released.

Now we have both the new CPR rules and the new CPD I will start to analyse these in detail. Obviously, it’s perfectly possible that between now and 1 April 2013 half the rules will have been rewritten, but we might as well start somewhere.

First up, and in no particular order, is the provision governing the recoverable costs for the new provisional assessment process that will deal with bills where the costs claimed are £75,000 or less.

By CPR 47.15(1):

“This rule applies to any detailed assessment proceedings commenced in the High Court or a county court on or after 1 April 2013 in which the costs claimed are the amount set out in paragraph 14.1 of the practice direction supplementing this Part, or less.”

By virtue of CPR 47.6(1) (as before):

“Detailed assessment proceedings are commenced by the receiving party serving on the paying party—

(a) notice of commencement in the relevant practice form; and
(b) a copy of the bill of costs.”

The claims to which this will apply are therefore clear.

CPR 47.15(5) states:

“The court will not award more than £1,500 to any party in respect of the costs of the provisional assessment.”

“Costs” retains its current definition (but now under CPR 44.1):

“’costs’ includes fees, charges, disbursements, expenses, remuneration, reimbursement allowed to a litigant in person under rule 46.5 and any fee or reward charged by a lay representative for acting on behalf of a party in proceedings allocated to the small claims track”

This is clearly broad enough to include (as it has always been treated as doing) both court fees and VAT.

Secondly, and I suspect this is an oversight on the part of those making the rules, this includes any success fee (the term is “costs” not “base costs”). It will therefore apply to claims being conducted with recoverable success fees where the detailed assessment proceedings are commenced on or after 1 April 2013.

A paying party who is VAT registered will therefore be able to recover the full £1,500 as profit costs.

A receiving party not registered for VAT will get £1,500 less the court fee, less VAT and to include any success fee. The current court fee for requesting a detailed assessment hearing where the costs claimed are between £50,000 and £100,000 is £980. By my maths, for a £75,000 bill where the claimant is not VAT registered and where a 100% success fee applies that leaves a balance of £216.67 base profit costs for the whole provisional assessment process.

There is a reasonable argument for saying the recoverable base costs of a receiving party should be much less than a paying party given the relatively limited amount of work expected from receiving parties with the massively streamlined Replies that are all that will be allowed, but still…

Also, it means that the lower the amount claimed the greater the profit costs recoverable as the court fee will be correspondingly lower. The court fee for a bill of £15,000 or less is £325. That would leave, where the receiving party is not VAT registered and where there is a 100% success fee, base profit costs of £489.58

It may be that the court fee for provisional assessment will be reduced, but no news yet on that front so far as I know.

Now for the killer.

The new CPD 5.19 to CPR 47 contains the same provision as appears in the current CPD:

“The bill of costs must not contain any claims in respect of costs or court fees which relate solely to the detailed assessment proceedings other than costs claimed for preparing and checking the bill.”

Implicit in this is that the costs of preparing and checking the bill form part of the assessment proceedings, even if the costs can be included within the bill itself. If that is so, the £1,500 must be taken to include the costs of drafting the bill. Firstly, that would mean the maximum recoverable for drafting a bill with a value of up to £75,000 is £1,500 (inclusive of VAT and any success fee). Secondly, any amount allowed for drafting the bill then needs to be offset against the £1,500 if the receiving party is awarded the costs of the provisional assessment.

Anyone fancy drafting a bill with a value of £75,000 (even including a 100% success fee) for £216.67 base profit costs? It is difficult to see how it could be argued that drafting a bill is part of the costs of “detailed assessment proceedings” but not part of the costs of “provisional assessment” (and thus excluded from the £1,500). The only part of the “provisional assessment” that is expressly unique to the process, rather than being part of the assessment proceedings overall, is the lodging of the limited papers with the court. Clearly the £1,500 is meant to cover the whole process and not just that limited step.

I’m going to enjoy the next fee months.

Qualified One Way Costs Shifting


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Kerry Underwood has produced another masterly costs update analysing Qualified One Way Costs Shifting.

This highlights another of the bizarre aspects of the implementation of the Jackson Reforms and one that seems to have attracted very little attention.

At the risk of oversimplification, in personal injury claims successful claimants will be able to recover costs from defendants in the ordinary way. However, successful defendants will only be able to recover costs, except in some limited situations (such as dishonest claims), up the level of any damages awarded to the claimant. Therefore, where the claimant fails on liability there will be no pot of money from which to recover costs. If a defendant wins on a Part 36 offer and the claimant’s damages are assessed at £2,000, that is the maximum that can be recovered in costs by the defendant.

The new rules come into force on 1 April 2013 at which stage:

“orders for costs made against a claimant may be enforced without the permission of the court but only to the extent that the aggregate amount in money terms of such orders does not exceed the aggregate amount in money terms of any orders for damages and interest made in favour of the claimant. Orders for costs made against a claimant may only be enforced after the proceedings have been concluded and the costs have been assessed or agreed.”

Again, the transitional provisions are crucial:

“This Section does not apply to proceedings where the claimant has entered into a pre-commencement funding arrangement (as defined in rule 48.2).”

In simple terms a “pre-commencement funding arrangement”, with some exceptions, is a CFA, CCFA, ATE or ATE equivalent entered into/obtained before 1 April 2013.

As Kerry points out, this means that Qualified One Way Costs Shifting is retrospective in all cases where there is no such funding arrangement in place.

My reading is that this will be retrospective even where there is an existing costs order in the defendant’s favour. Claimants do not need to wait until 1 April 2013 before discontinuing. Unless it is possible to enforce the costs order before 1 April 2013 (ie in itself requiring costs to have been agreed/assessed by then) the order becomes, in a case where the defendant has won on liability, not worth the paper it is written on. For cases where the defendant has won on a Part 36 offer, the order is only as good as the level of damages recovered by the claimant.

Genuine BTE insurers (ie those whose cases are not run with a CFA with a success fee) will be laughing all the way to the bank (assuming they have picked up on this).

Given this decision will impact on a significant number of cases that have been brought/are being brought against the NHSLA, local authorities and other public bodies, one does have to seriously wonder whether this was intentional.

It makes the Court of Appeal’s decision in Simmons v Castle to award the 10% damages uplift to all “conventional claimants” (ie those without CFAs in place before 1 April 2013) all the more strange. A claimant currently bringing a claim with a genuine BTE policy in place will get an extra 10% damages to compensate them for not being able to recover the success fee that does not exist and will also benefit from QOCS to compensate them for not being able to recover the cost of an ATE policy that they also did not have.

The beginning of the end?


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Lord Neuberger’s speech at the Association of Costs Lawyers’ Annual Conference 2012 finished with the warning:

“the Jackson reforms represent the boldest attempt to cure our costs problem yet attempted. Should they fail to reduce costs, it seems to me that we will face a stark choice: the rejection of the English costs rule and the adoption of either a US-style costs rule or a German-style fixed costs regime.”

Is the spectacularly botched implementation of the Jackson reforms a cunning way to guarantee this outcome?

Proportionality v Costs Budgeting


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Costs budgeting is the new hot topic in costs law (although possibly gone rather off the boil with news that a growing number of claims will be exempt from automatic costs management) and so I share on the Costs Law Articles Archive section of Legal Costs Central my article discussing the logic of both proportionality and costs budgeting/detailed assessment, previously published in Solicitors Journal.

Application for relief from sanctions


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Relief from sanctions applications are currently governed by CPR 3.9:

“(1) On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order the court will consider all the circumstances including –

(a) the interests of the administration of justice;
(b) whether the application for relief has been made promptly;
(c) whether the failure to comply was intentional;
(d) whether there is a good explanation for the failure;
(e) the extent to which the party in default has complied with other rules, practice directions, court orders and any relevant preaction protocol;
(f) whether the failure to comply was caused by the party or his legal representative;
(g) whether the trial date or the likely trial date can still be met if relief is granted;
(h) the effect which the failure to comply had on each party; and
(i) the effect which the granting of relief would have on each party.”

This is to be changed from 1 April 2013 to a newly worded CPR 3.9:

“On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need—

(a) for litigation to be conducted efficiently and at proportionate cost; and
(b) to enforce compliance with rules, practice directions and orders.”

I interpret this as being a significant change in emphasis. Previously the courts have tended to approach applications for relief from sanctions as being about achieving an outcome that it ultimately “fair” regardless of the delay and cost this brings to the litigation. The new test appears to be one firmly refocused on robust case management with justice being achieved through stricter enforcement of court orders and rules thereby bringing swifter resolution to the dispute and in a more cost effective manner.

If that interpretation is correct, it means case law previously governing applications for relief from sanctions will become largely redundant.

Applications for relief from sanctions in costs matters tend to arise where there has been a failure to notify of additional liabilities during the course of a claim or a failure to serve the appropriate documents in support of additional liabilities when commencing detailed assessment proceedings.

Again, the transitional provisions are worth reviewing:

“The amendments made by … these Rules do not apply to applications made before 1 April 2013 for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order.”

Therefore the new stricter test applies depending on when the application for relief from sanctions is made, not the date of the breach.

Where there is, for example, a failure to give proper notification in May 2010 but an application for relief from sanctions is not made until May 2013 it will be the new test that applies.

New Employers’ Liability and Public Liability Protocol


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We now have the draft rules for the new Employers’ Liability and Public Liability Protocol and the amended RTA Protocol.

A number of possible surprises in the small print but one issue that jumps out is that disease claims (other than mesothelioma and those involving more than one defendant) are treated as employers’ liability claims and therefore fall within the protocol. And therefore attract fixed fees (at a level yet to be announced). This applies unless a letter of claim was sent to the defendant before 1 April 2013.

Another chunk of costs work disappears.

New proportionality test – Further transitional amendments


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I knew it was a mistake to start commenting on the new CPR rules at this stage.

Following my post on the ambiguity as to which claims would be subject to the new proportionality test it now appears that a new statutory instrument will be published in March to introduce a new transitional provision within rule 44.3 to deal with this:

“to the effect that costs incurred in respect of work done before 1 April 2013 will not be disallowed if they would have been allowed under the rules in force immediately before that date”.

What makes this truly shocking is that the letter confirming these changes from Lord Justice Stephen Richards, who chairs the rule committee, records the fact that the committee was aware of this problem and agreed to make this change at the meeting on 8 February 2013 which approved the rules that were then released on 12/13th February. However, when releasing the SI there was no mention that they had already decided to change this in at least one crucial aspect.

How are practitioners meant to prepare for the changes and train staff when, ludicrously late in the day as the rules have been published, we can’t even trust the accuracy of what has been released?

Good luck to legal publishers working to a March publication date.

Omnishambles.

Senior Courts Costs Office listings


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I’ve just received a Notice of Hearing from the Senior Courts Costs Office for a three hour hearing before a costs officer. Listed for September.

Seven months to get a three hour hearing.

And we haven’t even started with the wave of satellite litigation post-Jackson.

New proportionality test – Transitional Provisions


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We now have the post-Jackson amendments to the Civil Procedure Rules. We still don’t have the new Costs Practice Direction.

I’m trying to resist the temptation of commenting on the Rules until we see the CPD. It may all become clear in due course.

However, we definitely do have the new proportionality test:

“44.3
(2)
Where the amount of costs is to be assessed on the standard basis, the court will—

(a) only allow costs which are proportionate to the matters in issue. Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred

(5) Costs incurred are proportionate if they bear a reasonable relationship to—

(a) the sums in issue in the proceedings;
(b) the value of any non-monetary relief in issue in the proceedings;
(c) the complexity of the litigation;
(d) any additional work generated by the conduct of the paying party; and
(e) any wider factors involved in the proceedings, such as reputation or public importance.”

It is no secret that the new CPD will give no guidance on how this should be applied.

At the risk of repeating myself, if it is deemed disproportionate to incur costs of £100,000 to recover £25,000 damages (as surely it must be) what level should the judge reduce the costs down to if he decides £100,000 was reasonably or necessarily incurred?

The interesting provision that jumps out is the transitional one dealing with this new proportionality test:

“Paragraphs (2)(a) and (5) do not apply in relation to cases commenced before 1 April 2013 and in relation to such cases, rule 44.4(2)(a) as it was in force immediately before 1 April 2013 will apply instead.”

What does “cases commenced” mean?

It is arguably drafted more widely than simply “cases where proceedings have been commenced”.

The old transitional provisions, when the CPR was first introduced, were clear:

“the general presumption is that no costs for work undertaken before 26 April 1999 will be disallowed if those costs would have been allowed in a costs taxation before 26 April 1999”

Therefore, the relevant date was when the work was undertaken.

A similar approach could have been adopted in relation to proportionality by excluding work done before 1 April 2013 from the new proportionality test. This has not been expressly done.

It is certainly arguable that where work has been done in anticipation of a claim that amounts to the case commencing.

However, it seems to be equally arguable that the relevant date is the date of the letter of claim. Until that date there is no claim that has been commenced. At most it is a possible case being investigated/considered.

We therefore have at least three possible definitions: “cases where proceedings have been commenced”, “cases where any work has been undertaken” or “cases where the claimant sent a letter of claim to the defendant containing a summary of the facts on which the claim is based”.

Given the potentially massive amounts at stake this issue will run to the Court of Appeal. At the same time the Court can tell us how the hell the new proportionally test is meant to be applied.

Here we are with the new rules due to come into force in around 30 working days and not only do we not know how the key proportionality test will be applied but we do not even know which cases it will apply to.

You couldn’t make it up.