Good news for costs draftsmen and costs consultants

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In a previous posting I reported some good news for personal injury lawyers and, in due course, law costs draftsmen and other costs professionals in the announcement that clinical negligence claims were predicted to increase.

Similar good news comes in a survey conducted by legal recruiters ASA, carried out among law firms. Only 18% expected the economic downturn to adversely affect them, with 46% expecting work to increase. One partner was reported as commenting: “people are always more likely to claim when money is tight”.

Further, in the current edition of Litigation Funding, Peter Smith, managing director of ATE insurer FirstAssist, was quoted as reporting a 40% increase in the past few months in the number of professional negligence cases it had funded. He stated: “Everything suggests that if you are unhappy with work that’s been done, then you might fight harder trying to obtain recompense during the credit crunch”.

In the next 12-24 months, costs draftsmen and costs consultants can expect to see an upturn in work. So long as contingency fees haven’t been introduced first.

Proposed court fee increases

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The Ministry of Justice has issued a consultation paper, Civil Court Fees 2008, on proposed increases in certain court fees (closing date 4/3/09). The most eye watering increase is the fee for filing a request for a detailed assessment hearing by a legally aided party where no other party is ordered to pay the costs of the proceedings. The proposed increase is from the current £105 up to a new figure of up to £5,000.

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Criticism of the current costs system

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Arnold J recently delivered some stinging criticism of the current approach to controlling legal costs. In the case of Research in Motion UK Ltd v Visto Corporation [2008] EWHC 3026 (Pat) he stated:

“the traditional approach to costs control of litigation in this country, which is after the event by way of an assessment of costs which limits the amount that can be recovered by the receiving party from the paying party, is inadequate and unsatisfactory. If we are to move to a system which better controls litigation costs, restricting ourselves to after the event remedies is unlikely to have the desired effect. A more proactive before the event approach is required.”

The recent rule change relating to costs capping orders is all the more surprising in light of this type of comment. I will be dealing with this change in more detail in a future posting.

The perfect legal website

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Designing a website for a legal firm is a difficult business. Some end up being a triumph of appearance over substance, with flashy visuals but no content of any interest. On the other hand, great informative content can be wasted with poor presentation. Another weakness with some firms’ websites is that they can often be no more than a web based version of the firm’s brochure.

However, after much searching, I can now reveal the winner of The Legal Costs Blog’s annual Best Solicitors’ Website Award: The Winner (links to external site).

Actually, the firm does have another website: Site two. But I definitely prefer the first. A bottle of champagne to anyone who can find a site that tops this year’s winner (law firm sites only).

Costs Estimates

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I was a recent speaker at the CLT Annual Solicitors Costs Conference. The other speakers included two highly respected Regional Costs Judges, Ian Besford and Chris Lethem (not that I’m suggesting other RCJs aren’t equally respected).

One of the issues that came up was costs estimates. Both judges commented on how they never see paying parties challenge the reasonableness of cost claims where there has been an inaccurate costs estimate filed by the receiving party. They obviously haven’t seen any of my Points of Dispute. Our existing clients will know that we always raise the issue of inaccurate estimates where this is a relevant factor. Those who have attended our in-house training sessions will also be familiar with the importance we place on costs estimates as part of the claims process.

For those claimant representatives that haven’t bothered to read the Costs Practice Direction (CPD) in recent years, it is not necessary for the paying party to show that they relied on an inaccurate estimate before the Court can take this into account. CPD 6.6(2)(b) makes clear that the Court can have regard to the difference where “the receiving party has not provided a satisfactory explanation for that difference or [emphasis added] the paying party reasonably relied on the estimate of costs”. The crucial word is “or”, not “and”. A failure to provide a satisfactory explanation is sufficient for this section to bite.

Put an end to excessive legal costs says MDU

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The following comes from a Medical Defence Union press release dated 1 February 2009:

In an editorial in its Journal published this week, the MDU, which represents over half of UK doctors, questioned the fairness of Conditional Fee Agreements (CFAs), which account for around 19 per cent of UK medical cases brought against MDU members. It revealed that claimants’ solicitors may demand 50 per cent higher hourly rates than defendants’ solicitors and that the costs awarded in cases brought under CFAs were significantly higher. For example, in the last three years, in those litigated CFA cases where the average damages were £5,000, the average claimants’ costs were more than four times higher at £22,000.

Dr Karen Roberts, MDU medico-legal adviser and Journal Medical Editor said:

“Of course, claimants who have been negligently harmed by their doctor should be compensated, but a system that provides solicitors’ firms with rewards which dwarf the value of a claim needs to be reformed.

“The number of clinical negligence cases the MDU sees is not increasing, but the cost of settling cases is rising by more than the rate of inflation. Legal rulings such as the recent Thompstone Judgment can make a difference, which is particularly dramatic for the NHS because it has so many high-value claims for babies who suffer neurological damage. MDU members’ claims, which arise out of care delivered in the primary and independent sectors, are not affected to the same degree and members will not see a dramatic rise in their subscriptions. However, in common with the NHSLA, we see one of the key inflationary factors as the excessive legal costs awarded to claimants’ solicitors. I t cannot be right that legal firms should continue to receive payments out of all proportion to the amount of damages awarded, particularly when these costs are funded, ultimately by the taxpayer.”

In the Journal editorial, Dr Christine Tomkins, Deputy Chief Executive of the MDU proposed a two-fold approach to addressing the issue of CFA costs. She wrote: “We propose first that the inequities introduced by very high success fees could be addressed by capping the success fees chargeable by claimants’ solicitors in CFA funded negligence cases. Second, we suggest there should be a restriction on the hourly rate of claimants’ solicitors so that they more closely resemble the rates charged by defendants’ solicitors. We are confident that there is now a will to tackle this question … We very much welcome the news that the Master of the Rolls has appointed Lord Justice Jackson to lead a fundamental review of civil costs, commencing in January 2009. We believe that there needs to be a review of the way clinical negligence cases are funded and we look forward to contributing to the review on behalf of members.”

New fixed fees v old fixed fees

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In an earlier post I discussed the proposed new claims process and questioned what the relationship would be between the proposed new staged fixed fees under the new claims process and the existing fixed predictable costs (CPR 45.7-45.14). It was far from obvious how the existing fixed fee system could survive alongside the new proposed fixed fees. Equally, it seemed contrary to all common sense to scrap a system that had just about bedded-in and was, for the most part, working reasonably well.

It appears that this problem has been giving those responsible for trying to draft the new rules similar headaches. At last year’s Motor Accident Solicitors Society annual conference, Janet Tilley, who sits on the Ministry of Justice stakeholder group, told the conference that certain issues had been "parked", including the interface with the current predictable costs regime.

Having abandoned the idea of having the new claims process cover anything other than low value RTAs, surely the sensible way forward was simply to introduce some simple, staged, fixed fees for the litigated cases on top of the current fixed fees, and dispense with the new claims process idea entirely. The failure to introduce fixed fees for all stages of low value RTAs was the main weakness in the existing scheme and could have been easily solved.

It will be fascinating to see how the problems created by the proposed new claims process and the proposed new staged fixed fees will be resolved.

Offers to settle costs

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One of the more unfortunate costs provisions in the CPR is the general presumption that the receiving party is entitled to the costs of the detailed assessment proceedings. This encourages some receiving parties to submit inflated and unrealistic bills and, unless the paying party makes an offer that they consider puts them at real risk, pursue the matter to an assessment hearing without making any attempt at settlement or making any offers of their own.

It is worth mentioning at this point that an offer to settle a costs claim made under Part 47.19 does not carry any automatic consequence, unlike a Part 36 offer. The courts certainly do place enormous weight on Part 47.19 offers but it would be a mistake for either party to think that beating such an offer is determinative.

However, the approach of failing to actively engage in negotiations carries its its own dangers. CPR 47.18 lists the various factors that the court "must" have regard to when deciding whether to make an order other than that the receiving party recovers their costs. This includes the conduct of the parties and the amount by which the bill is reduced.

Referring to the case of Butcher v Wolfe [1999] 1 F.L.R. 334, the Court of Appeal in Codent Ltd v Dyson Ltd EWCA Civ 1835 stated:

"The second point to be derived from the case of Butcher is that there is an obligation to negotiate, placed upon the parties, which, as that case held, was not limited purely to family proceedings. A party who has refused a Calderbank offer point-blank and failed to negotiate might be penalised in costs if such refusal was unreasonable."

This approach has been reemphasised by Jackson J (now Jackson LJ) in Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2008] EWHC 2280 (TCC) where he held that if one party makes an offer to settle a claim which is nearly but not quite sufficient and the other party rejects that offer outright without any attempt to negotiate, then it might be appropriate to penalise the second party in costs.

In my experience, judges are willing to apply this reasoning to detailed assessment costs. Further, even where (rarely) I have not succeeded on my own Part 47.19 offer, I have often been able to persuade a judge to make a costs order in the paying party’s favour or no order for costs where the bill has been significantly reduced.

As readers are no doubt aware, Jackson LJ has now been given the task of undertaking a fundamental review of litigation funding. I am sure he is a regular reader of this blog and he may wish to consider the following modest proposal. Receiving parties have an enormous advantage in detailed assessment proceedings because they have access to something the paying party does not: their own file of papers. A receiving party is in a far better position than the paying party to actually calculate what their bill is really worth. Paying parties must always engage in a certain amount of guess work, however "educated" that guess is.

Why not introduce a rule that the receiving party must make an offer to settle in relation to their own bill of costs and they will not be able to recover their assessment costs if they fail to beat that offer? Something similar was proposed, but dropped, in respect of quantum hearings for the new claims process. This offer should be made at the same time as serving the bill and any further offers would provide no further protection. This would force receiving parties to sensibly value their costs from the outset and would almost certainly dramatically reduce the number of detailed assessment hearing.

I would be interested to hear readers’ views.

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Welcome to The Legal Costs Blog

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Welcome to the new Legal Costs Blog. Although the blog is officially launching today, we have added some content already and some archive material to give you an idea of the kind of thing to expect.

Please browse around and leave a comment as to what you think and let us know if you have any suggestions for future topics.

Part way down the page, on the right hand side, you will find a box to enter your email address so you can subscribe and receive any future posts straight to your email inbox.