A world full of legal costs information

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The New Law Journal has just relaunched their website (and very nice it is too). They have a section devoted to legal costs (click link). Also available are some of the excellent costs articles from the costs team at Kings Chambers although the indexing could possibly do with a bit more work (why does the Kings Chambers article not appear in the Costs section?).

Clay Cost Muppet Shooting

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Here we are in the middle of August and you find that the rest of the office is away on holiday and it’s too wet to go outside to play. To help pass the time why not play Clay Cost Muppet Shooting (external link) courtesy of Box Legal? Apparently, no cost muppets were harmed or subjected to psychological torment during production of the game.

Another legal costs negotiating trap

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Negotiating settlement of legal costs can be difficult at the best of times. However, the last thing one wants at the end of a difficult negotiation is to discover that there has been no settlement at all or, at least, not on the terms that you thought.

In the case of Amer v London Borough of Barnet [2009] EWHC 90146 (Costs) the Claimant served a bill of costs totalling £15,816.45. After points of dispute were served by the Defendant, the Claimant wrote to the Defendant with the following offer: “I would be prepared to agree a reduction in the amount of the bill from £15,816.45 to £14,800″.

The Defendant replied: “In the interests of resolving this matter my client has agreed your proposals. I have requested cheque and will forward asap”.

The Claimant then requested payment of interest in addition to the £14,800, which the Defendant opposed on the basis that the sum proposed by the Claimant’s solicitors and accepted by the Defendant should be regarded as a sum inclusive of any interest.

When the dispute reached court, the costs judge concluded that the key words in the original offer were: “I would be prepared to agree a reduction in the amount of the bill from…”. He held: “I do not accept that the failure to mention in that email either interest or the costs of assessment should be treated as an implied inclusion of those sums in the £14,800 proposed. … Interest on costs and the costs of assessing costs are incidental extras to the amount of the costs claimed in the bill. The email expressly refers to a reduction in the amount of the bill only and I do not accept that it should be treated as impliedly referring to the incidental extras I have described”. He therefore allowed interest in addition to the amount agreed.

In a previous posting I warned of the Part 47.19 trap. This is another lesson in the need to be very careful in the wording of any negotiations on costs. As a general rule, always make clear that any offer is to be treated as fully inclusive of interest and the costs of detailed assessment.

Tranter v Hansons (Wordsley) Ltd – Duty to investigate BTE

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Under the, now revoked, CFA Regulations 2000 there was a duty to advise a client whether the legal representative considered that the client was insured under an existing contract of insurance (BTE) before the CFA was entered into (Regulation 4(2)(c)). Failure to do this would render the CFA invalid.

Since the Court of Appeal decision in Sarwar v Alam [2001] EWCA Civ 1401, if not before, it has been common knowledge that motor policies commonly contained BTE cover available for the benefit of passengers, even if the potential claim is against the insured driver. Therefore, failure to consider whether a passenger may have the benefit of BTE cover available through the defendant driver may amount to a breach of the Regulations.

A subtle variation of this issue arises where the claimant was a passenger on a bus and the accident was caused by the negligence of the bus driver. It has been common, for a number of years, for such BTE cover to also be attached to bus companies’ motor insurance.

There have now been a number of decisions covering this issue and exploring whether a failure to make appropriate enquiries of the defendant bus company as to whether such cover was available would invalidate the CFA.

In Cochrane v Chauffeurs of Birmingham (Central London CC) 22/6/07, Donaldson v Four Square Coach Company (Huddersfield CC) 11/6/07 and Robinson v Doselle (Milton Keynes CC) 19/12/05 the courts held on each occasion that there had been a material breach of the Regulations.

The one case that went against the flow was the decision of Master Rogers in Dole v ECT Recycling Ltd [2007] EWHC 90086 (Costs). In that case the Claimant’s solicitors put forward witness evidence that stated: “I confirm that as at the date when the CFA was signed in this case (15/07/2004) it was not common knowledge that the bus companies would have been covered by Before the Event Legal Expenses insurance which would have been available for passengers to sue the bus company for the negligent driving of its own drivers”. The Defendant did not put forward any evidence to counter this claim. Master Rogers held: “I accept the clear conclusion from Mr Bennett’s uncontradicted evidence that the state of knowledge of solicitors specialising in this field in the summer of 2004 was not that the defendants to a claim of this nature might have passenger cover, and in particular that such cover would be dealt with independently of any claim made against them by the passenger.” He therefore concluded that the reasonable enquiries that a solicitor was expected to undertake would not have extended to considering whether BTE cover was available in this situation as they would not have known such cover might be available.

The latest decision on this issue is that of Tranter v Hansons (Wordsley) Ltd [2009] EWHC 90145 (Costs). The Claimant’s solicitors produced a witness statement that stated: “I confirm that as at the date when the CFA was signed in this case (14/04/05) and based on my experience in the personal injury field, it was not common knowledge in the industry that a bus company would have applied Legal Expenses Insurance to the passengers on a bus to sue itself”.

Master Wright nevertheless concluded: “In my judgment the Defendant has raised a genuine issue and I consider that the Claimant’s solicitors in this case have failed to comply with Regulation 4(2)(c) of the CFA Regulations 2000. Whether or not it was common knowledge in the industry at the date the conditional fee agreement was signed that a bus company would have applied legal expenses insurance to the passengers on a bus to sue itself, it certainly was common knowledge that motor insurance policies frequently provide insurance cover for passengers to enable them to sue the driver. This is clear from Sarwar v Alam where the judgment of the Court of Appeal was given in 2001. In my judgment there is no justification for making a distinction between private motor insurance policies and insurance policies taken out by the operators of public vehicles such as buses. … In the present case the Claimant’s solicitors knew (or ought to have known because of the Court of Appeal’s decision in Sarwar) that private motor insurance policies often contained provisions which protect passengers. They ought also to have anticipated that in the case of public vehicles (such as buses) there could be similar provisions in the insurance policies taken out by the operators of such vehicles. They should have taken reasonable steps (a letter or two would have sufficed) to enquire. However they did not do this”.

The CFA was therefore held to be invalid.

Changes to the assessment process

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At the end of July I attended the last of Jackson LJ’s Costs Review Seminars. This seminar focused on detailed assessments and explored various ways to try to improve the process. The majority of those attending were costs draftsmen, costs judges and other costs professionals.

What was interesting was the way that some of the ideas that emerged were met with virtually unanimous support from those present except for one or two individuals who clearly passionately believed that these very same proposals were either unworkable or entirely counter-productive.

One of the suggestions was that the current format for bills of costs was inappropriate and should be replaced with a new format. Rather than, as now, largely focusing on a list of chronological items of work, the bill should be more focused on providing an explanation as to why certain work was necessary or why this work was unusually time consuming. This proposal received virtually unanimous support and a costs judge and a regional costs judge have been tasked with producing a new model bill to incorporate this suggestion.

Although understanding the logic behind this proposal, I was one of the very few who strongly opposed this idea. Preambles to bills are already often unnecessarily long and self-serving, trying to justify the level of costs claimed by highlighting the supposed difficulties in the matter. My concern is that any formal requirement to explain and justify at the outset the costs claimed will turn bills into pages of lengthy prose that serve little purpose other than to drive up costs. Worse, much of this may prove to be entirely wasted. Time will be spent seeking to justify work that the paying party may have had no intention of disputing. Hopefully the model bill and any changes to the rules will overcome my concerns.

A second proposal was to introduce provisional assessments for lower value claims for costs. These would be conducted on paper with an option to proceed to a full detailed assessment if a party was unhappy with the provisional assessment, though possibly with strict costs penalties if a party failed to do better at the full assessment. I shared the majority view that this was a sensible proposal. There were only two dissenters and these were, interestingly enough, a regional costs judge and a costs officer. Their concern was that the provisional assessment option would be so attractive to parties that it would lead to a far higher number of cases reaching the courts than currently proceed to detailed assessment. This would lead to the courts being swamped with work they could not cope with. Of course, given any proposals emerging from the Jackson Review will almost certainly include fixed costs for fast-track claims this concern may be somewhat misplaced. Based on the figures being discussed at the seminar, for cases to be eligible for provisional assessment, most multi-track claims would be excluded. There would be relatively few claims likely to qualify once fast-track claims are removed from the process. Further, the workload of the courts should significantly decrease, in terms of costs disputes, as a result of fixed costs.

Click image to enlarge:

qc june3 1997


Fixed legal costs for the fast-track

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Any remaining doubt as to whether Jackson LJ’s costs review will recommend fixed legal costs for all fast-track matters has been removed by the recent report in the Law Gazette that he has asked the Civil Justice Council to start work on setting the appropriate level of fees for this work. He has asked the Council to try to agree the figures by 12 November 2009 for inclusion in his final report.

At last week’s Costs Review Seminar held by the Costs Practitioners Group, chaired by Jackson LJ, the discussions proceeded on the basis that it was a foregone conclusion that fixed costs for fast-track cases would form part of the final recommendations.

All the madder then that others are pressing ahead with the new Claims Process (see previous post) with its own fixed fee regime. A lot of time and effort is going to have been wasted by one group.