Reasonable legal costs – Compared to what?

It is not unusual for me to make offers in relation to claimants’ bills of costs that represents only a fraction of the amount claimed.  However, from time to time the response I receive is not simply the inevitable one of displeasure but what appears to be a genuine reaction of incredulity.  There appears to be total disbelief in relation to the figures I have put forward, particularly in relation to document time in high value claims.  The claimant’s lawyer takes the view that no solicitor, however good, could possibly be expected to undertake the work in so little time.

The problem that many claimant lawyers have is that their experience of what is "normal", in terms of time taken to run a claim, is often limited to no more than how long it takes them, or possibly some of their colleagues in the same firm, to run similar cases.  They have no idea how other firms handle such claims or how quickly.  If they spend 100 hours on documents for a certain type of disease claim they assume that is normal and reasonable.  The fact that the majority of other firms, for a similar claim, might take, for example, 50 hours is something totally outside their field of experience.

On the other hand, as a defendant costs practitioner, I see large numbers of bills of costs from firms throughout the country.  In my capacity as a manager, I have seen literally thousands more claims for costs beyond those I have dealt with personally.  It is staggering the difference in the size of a bill from an efficient firm compared to those from inefficient firms.  Before some readers start complaining that they should not be criticised for dealing methodically and conscientiously with their clients’ claims and not cutting corners, my experience is that the best fee earners, in terms of the results they achieve for their clients, are very often exactly the same ones who produce the most modest bills.  It is often those firms that are not real specialists (despite their claims to the contrary) who under-settle claims, take twice as long to achieve under-settlement, and then produce the highest bills.  One of the obvious criticisms of the current legal costs system is that it not only rewards inefficiency but fails to properly reward the skilled lawyer.

I fear that there is a similar danger for costs judges.  The bills that come before them are invariably the ones that are the most excessive. A paying party (or at least one with any sense) will not take to detailed assessment a bill that is broadly reasonable.  Even where the bill is overstated by 10-25% it will usually be possible for the parties to agree a compromise.  Therefore, the cases that come before costs judges are usually ones where the amounts claimed are more likely to be at least 25%+ over what a paying party knows to be reasonable compared to cases run by other firms.  More often, the amount claimed is 35%+ over a reasonable figure.  So what do most costs judges have to measure these claims against?  Other excessive bills that have also been brought before them to be assessed.  You can see the problem.  Costs judges run the danger of coming to believe the excessive bills that come before them are typical.  There should be some process whereby costs judges routinely have submitted to them the bills produced by the best claimant firms so that they have a yardstick of excellence against which to measure claims for costs.

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2 2 99

Guideline Hourly Rates 2010

Will there be an increase in the Guideline Hourly Rates for 2010?  The latest news is that the Master of the Rolls has decided to wait until after publication of Sir Rupert Jackson’s report of his review of Civil Litigation Costs before deciding whether to make any changes to the current Guideline Hourly Rates. That report is due to be published on 14 January 2010.  My prediction: no change.

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6 10 98

A working alternative to recoverable success fees?

As the tension mounts as to what might be going through the mind of Lord Justice Jackson as he prepares his final report on his civil costs review, might he be influenced by the litigation landscape north of the boarder?  The recently published Report of the Scottish Civil Courts Review states that the majority of damages claims in Scotland are pursued on the basis of "speculative fee arrangements" (no win, no fee agreements).  This is despite the fact that: "Unlike in England and Wales, success fees and ‘after the event’ insurance premiums are not recoverable and will have to be paid by a successful [claimant] from the damages recovered, unless they are waived or absorbed by the [claimant’s] solicitor".  Jackson LJ’s Preliminary Report raises a number of concerns about the English system of recoverable success fees and ATE premiums.  If non-recovery seems to work in Scotland, why not here?

And while Jackson LJ may be looking north of the boarder, they are looking back.  The Scottish report concludes: "We have given careful consideration to the use made of speculative fee arrangements in this country and the experience of conditional fee agreements in England and Wales. We consider that it would be premature to recommend any changes to speculative fee agreements as they are presently constituted in Scotland. The civil costs review in England and Wales chaired by Lord Justice Jackson should be monitored for its research findings and its conclusions"

Deep-fried Mars Bar anyone?

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14 7 98

One-way costs shifting – The sting in the tail

I recently received an email from someone who is writing an article for their university newsletter and wanted my views on the potential impact of the Civil Litigation Costs Review on defendant panel solicitors.  This is an interesting issue and one that, to be honest, I had not previously given much thought to.  Much of the Jackson Review, at least so far as it covers the type of work undertaken by defendant panel solicitors, is focused on controlling the costs that claimant lawyers incur, rather than those of defendants.  My previous posts on the subject have therefore focused on that aspect, rather than the impact on defendant firms.

Lord Justice Jackson’s Preliminary Report has, so far as is relevant, two main proposals.  These are the ones most likely to find there way into the final report. 
The first of these is extending fixed costs to all stages of the fast-track.  Although the Preliminary Report, so far as I can see, does not spell this out, it seems clear that it is intended that fixed costs would apply to claimant solicitors but not defendant ones.  If anyone is able to point me to something that suggests this view is mistaken, then please let me know.  This proposal would not, in itself, have any direct impact on defendant solicitors.  If my reading of the proposal is correct, and if only this change was made, it might lead to the strange outcome that defendant solicitors were able to recover more in costs than claimant solicitors.  That would be a first.
The more interesting issue is whether the extension of fixed costs would have an impact on claims behaviour which would, in turn, impact on defendant firms.  It is generally accepted that the introduction of the predictable costs regime encouraged some claimant firms to issue proceedings at the first opportunity to escape the fixed costs scheme (see page 126 of the Preliminary Report).  On the one hand, an extension of fixed costs might encourage some claimant firms to settle cases as quickly as possible, doing as little work as possible in the process, to maximise their profit margins.  This might reduce the number of issued cases and therefore have an adverse impact on the volume of cases being handled by defendant firms.  Conversely, some claimant firms might be encouraged to push cases to the next stages of the claims process to secure the fixed fees applicable to those stages.  This might, in turn, increase the volume of cases being dealt with by defendant firms.  Time will tell. 
If the claims process does become less adversarial, and claims settle more quickly and with less work, this may impact on what insurers are willing to pay defendant firms (much of the volume work currently being done under fixed fees agreements).  This may be of particular relevance for firms that offer claims management services for pre-litigation work.
The second major suggestion in the Preliminary Report is a move to one-way costs shifting (see previous post).  If Jackson LJ’s current thinking on this issue is correct (and this is a big “if”) this should be largely costs neutral from insurers’ perspective.  However, it might have an unintended consequence for defendant firms.  Traditionally, due to the downward pressure brought by insurers, defendant solicitors have charged ridiculously low hourly rates (I should know as this, in turn, impacts on what I can charge for defendant costs work).  In the past, defendant solicitors have therefore been able to only recover low hourly rates from their opponent when they secure a costs order.  However, in recent years there has been a growing trend for defendant firms to enter into discounted CCFAs.  Where the claim is not successfully defended the insurer will pay the typical low hourly rates (as before).  When a costs order is made in the defendant’s favour, the defendant firm can now (under the terms of the CCFA) recover costs from the opponent at the normal hourly rates appropriate for the case (usually Guideline Hourly Rates).  This has helped defendant firms in recent years to increase their profits.

However, if one-way costs shifting is introduced, defendant firms will be back to the position of only being able to recover the lower rates that insurers are prepared to pay (because there will be nobody else to pay).  Admittedly, it is only in a minority of cases that positive costs orders are secured by defendants, but defendant firms are likely to notice the difference when it comes to their bottom line.

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qc mar 17 1998

APIL does the Hokey Cokey on fixed fees

I previously reported (see post) on the Association of Personal Injury Lawyers (APIL) walking out of talks on extending fixed costs in personal injury cases.  The latest news is that APIL is now back in.  APIL has explained its decision to rejoin the talks being due to the fact that the Civil Justice Council agreed to discuss matters of process, and not just the level of fixed fee, and that it had been offered the opportunity to make a final written submission on this issue to Lord Justice Jackson.  Nevertheless, APIL maintains it still has “profound skepticism” about the need to extend fixed costs.

In a further boost to Jackson LJ, the new Lord Chief Justice, in a recent interview with the BBC, expressed the hope that the cost of civil litigation would be "properly examined" following the publication of Jackson LJ’s report.  There is building up a virtually unstoppable momentum behind the idea that radical changes need to be made to control legal costs.  Whichever party comes to power after the next election (and at this stage it might be either the Conservative party or the Tory party) there is not going to be an injection of fresh public money to pay for the costs the current system creates.  Any change is going to be focused on limiting the costs that are incurred during the process or the costs that are recoverable at the end.

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qc oct 7 97

Notification of funding – The New Rules

In a previous posting (read here) I discussed the old rules relating to providing information about the funding of a claim.  The latest update to the Civil Procedure Rules has made important amendments which came into force on 1st October 2009.
The old CPR 44.3B read:
“(1) A party may not recover as an additional liability –
(c) any additional liability for any period in the proceedings during which he failed to provide information about a funding arrangement in accordance with a rule, practice direction or court order”
The new wording of CPR 44.3B is:
“(1) Unless the court orders otherwise, a party may not recover as an additional liability –
(c) any additional liability for any period during which that party failed to provide information about a funding arrangement in accordance with a rule, practice direction or court order;
(e) any insurance premium where that party has failed to provide information about the insurance policy in question by the time required by a rule, practice direction or court order.
(Paragraph 9.3 of the Practice Direction (Pre-Action Conduct) provides that a party must inform any other party as soon as possible about a funding arrangement entered into before the start of proceedings.)”
These changes fall into four categories:
1.      The wording “in the proceedings” is deleted and the reference to the new wording of the Practice Direction (Pre Action Conduct) makes it clear that notice must now be given pre-proceedings.
2.      The insurance premium provision deals with the consequence of not giving the information discussed below.
3.      The addition of the new wording “unless the court orders otherwise” is perhaps surprising. It was previously clear that failure to comply with the notification provision produced an automatic sanction in that the additional liability was not recoverable (in the absence of a successful application for relief from sanctions).  It now appears to be in the general discretion of the court as to whether to allow the additional liability despite the breach, although the starting point is obviously non-recoverability.  What is strange is that the new wording is followed by the same note that previously appeared: “Rule 3.9 sets out the circumstances the court will consider on an application for relief from a sanction for failure to comply with any rule, practice direction or court order”.  If the court now has a general discretion there would be no need to formally make an application for relief from sanctions.  Or, is the wording “unless the court orders otherwise” meant to refer to the situation where a successful application has indeed been made, but not otherwise?  We’ll no doubt have to wait for the first decisions on the correct interpretation.
4.      The word “he” is replaced by the non-sexist “that party” (so as not to upset any chicks reading).
Paragraph 9.3 of the Practice Direction (Pre-Action Conduct) now reads (amendments underlined):
“Where a party enters into a funding arrangement within the meaning of rule 43.2(1)(k), that party must inform the other parties about this arrangement as soon as possible and in any event either within 7 days of entering into the funding arrangement concerned or, where a claimant enters into a funding arrangement before sending a letter before claim, in the letter before claim.”
For the reasons I gave in the previous posting on this subject, I am of the view that these changes clarify, rather than change, the requirements concerning pre-proceedings notification (although the corresponding transitional provisions might suggest the contrary).
An important change has been made to the Costs Practice Direction in respect of staged After-the-Event (ATE) premiums.  CPD 19.4(3) now reads:
“Where the funding arrangement is an insurance policy, the party must –
(a) state the name and address of the insurer, the policy number and the date of the policy and identify the claim or claims to which it relates (including Part 20 claims if any);
(b) state the level of cover provided by the insurance; and
(c) state whether the insurance premiums are staged and, if so, the points at which an increased premium is payable.”
This finally formalises the guidance given by the Court of Appeal in Rogers v Merthyr Tydfil CBC [2006] EWCA Civ 1134.
What is not 100% clear is what the consequence would be of failing to give notification of the fact the policy is staged or to give the trigger points.  Would the receiving party lose all premiums or would they still be able to recover the first stage premium (on the basis that the paying party can be no worse off in respect of this first premium even if they were not notified of the staging; the prejudice comes from not having the opportunity to settle the claim before the subsequent premiums become payable)?  More test litigation ahead for costs draftsmen and other costs professionals.
It should be pointed out that none of these changes affect those acting under discounted CFAs\CCFAs without a success fee (usually defendants).  There is no need to provide notice of funding in this situation because the full hourly rate payable in the event of a win is not treated as being an additional liability (see Gloucestershire CC v Evans [2008] EWCA Civ 21).
There are also important changes to the rules concerning ATE premiums in publication proceedings although, frankly, if you work in that niche area you should already be more than aware of those changes.

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qc sept 16 97



Civil Costs Newsletter

Whilst opening a recent copy of New Law Journal, a complimentary copy of Butterworths Civil Costs Newsletter fluttered out. Now, there’s obviously no such thing as too much legal costs information and so another publication devoted to the subject can be no bad thing. However, on the back of the newsletter was a form to complete: "YES! I would like a 12-month subscription to Butterworths Civil Costs Newsletter, please invoice me for £185".

So, what do you get for your £185? Based on the edition I saw:

  • This monthly newsletter consists of 8 sides of A4 paper. Other than a short plug for a Costs and Litigation Funding Conference, you’ll be pleased to learn there are no advertisements.
  • The first page provides some news items. These consist of short reports on a government consultation on the legal aid budget, the Birmingham Technology and Construction Court and Mercantile Courts costs-management pilot regime and the Law Society’s response to the Jackson Review. All interesting, but most of this would have already been reported in other legal journals.
  • Page 2 consists of an article by Richard Scorer, Head of Personal Injury at Pannone LLP, arguing that claimants should not lose part of their damages to pay legal costs. A perfectly interesting article but one that has simply been reprinted with a couple of additional paragraphs from an article that appeared a few weeks earlier in New Law Journal.
  • Page 3 consists of an analysis by Michael Cook (of Cook on Costs fame) on some of the issues raised by the Jackson Review.
  • Page 4 and 5 provides a short analysis on the rules relating to costs estimates. This is largely simply reciting sections of the Costs Practice Direction and Solicitors’ Code of Conduct, rather than providing fresh commentary.
  • Pages 6 and 7 contains what is probably the highlight of the newsletter, being a review of the law relating to payments on account and interim costs orders by 4 New Square chambers.
  • Page 8 consists of a case summary of a decision concerning third party costs order by the Costs Team at Kings Chambers. Although an interesting case, it is clearly very fact specific.

All in all, £185 a year seems rather optimistically priced. The New Law Journal itself costs £285 a year for a weekly publication and contains regular costs articles including those written by the Costs Team at Kings Chambers. The Solicitors Journal, also weekly, costs £283.80 a year and includes Costs Updates written by yours truly.

Although not entirely a fair comparison, Peter Hurst’s Civil Costs, 865 pages in hardback, is priced at £198 and Cook on Costs 2009 is priced at £82 for 741 pages in paperback.

However, in terms of value for money, my spies in the costs world inform me that a new entrant to the market will win the crown (see previous post) hands down.

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qc aug 12 97

E-disclosure and legal costs

One of the more niche topics that Lord Justice Jackson’s Costs Review is examining is e-disclosure. This is a specialist area and I do not propose to comment on the issues and problems that arise. Rather, I would suggest that those readers who are interested in this topic visit The e-Disclosure Information Project website where there is detailed consideration of this area. There is also an interesting post on that site concerning legal costs and the detailed assessment process.

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qc july 1 97